NAGPUR NAGRIK SAHAKARI BANK, Nagpur V. ACIT CIRCLE-4, Nagpur

ITA 393/NAG/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75936 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 29-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRITI JAIN DAS
• Assessee Lawyers: R V LOYA
• Keywords: Depreciation; Cost of acquisition
• Section: 12; 143(3)

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL-E -BENCH, NAGPUR ! ! ' ! /(THROUGH VIDEO CONFERENCE AT MUMBAI) # # # # $ $$ $ % %% % . . , '& '& '& '& $ $$ $ '!() '!() '!() '!() , ! !! ! . . BEFORE S/SH.H.L.KARWA,PRESIDENT AND RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.393/NAG/2012 # # # # *# *# *# *# / ASSESSMENT YEAR 2009-10 NAGPUR NAGRIK SAHAKARI BANK LTD., 79 AMBEDKAR CHOWK, CENTRAL AVENUE ROAD, NAGPUR-440008 PAN: AAAAN0217F VS. ACIT CIRCLE - 4, AAYAKAR BHAVAN, CIVIL LINES, NAGPUR. ( +, / APPELLANT) ( -.+, / RESPONDENT) ASSESSEE BY : R.V.LOYA REVENUE BY : PRITI JAIN DAS / 0 / DATE OF HEARING : 23- 01 -201 4 1* / 0 /DATE OF PRONOUNCEMENT : 10- 02 -201 4 , 1961 254 )1( ! !! ! (/#/ (/#/ (/#/ (/#/ 2!3 2!3 2!3 2!3 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM - ! ! ! ! 24 24 24 24 , '!() '!() '!() '!() ! !! ! : CHALLENGING THE ORDER DATED 24.09.2012 OF THE CIT(A )-II,NAGPUR, ASSESSEE-BANK HAS RAISED FOLLOWING GROUND OF APPEAL: 1.ON THE FACTS & CIRCUMSTANCES OF THE CASE, THE ASS ESSMENT ORDER PASSED BY THE LEARNED ASSESSING OFFICER U/S 143(3) IS BAD IN LAW AND ON FACTS AND T HE LEARNED CIT APPEALS HAS ERRED IN CONFIRMING THE SAME. 2. ON THE FACTS & CIRCUMSTANCES OF THE CASE, THE LE ARNED ASSESSING OFFICER HAS ERRED IN HOLDING THAT T HE DEPRECIATION ON TRANSFER OF GOVERNMENT SECURITIES F ROM AFS (AVAILABLE FOR SALES) CATEGORY TO HTM (HELD TO MATURITY) CATEGORY, AS PER RBI GUIDELINES IS NOT ALLOWABLE AND THE LEARNED CIT APPEALS HAS ERRED IN CONFIRMING THE SAME. 3.ON THE FACTS & CIRCUMSTANCES OF THE CASE, THE LEA RNED CIT APPEALS HAS ERRED IN HOLDING THAT THERE IS NO DIMINUTION AT ALL IN THE VALUE, ON TRANSFER OF G OVERNMENT SECURITIES FROM AFS (AVAILABLE FOR SALES) CATEGORY TO HTM (HELD TO MATURITY) CATEGORY AS PER RBI GUIDELINES. 4.THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GR OUND OF APPEAL WITH THE PERMISSION OF THE HONBLE MEMBERS. 2. ASSESSEE-BANK,FILED ITS RETURN OF INCOME ON 25/09/2 009 SHOWING TOTAL INCOME OF RS. 3.93 CRORES. ASSESSING OFFICER(AO) FINALISED THE ASSESSM ENT ON 26.12.2011 DETERMINING THE INCOME OF THE ASSESSEE AT RS. 7.95 CRORES. AS THE GROUND NO.1 IS GENERAL IN NATURE,HENCE,IT DO ES NOT REQUIRE ADJUDICATION. GROUND NO.2-3 ARE ABOUT DEPRECIATION ON TRANSFER O F GOVERNMENT SECURITIES FROM AFS (AVAILABLE 2 ITA NO. 393/NAG/2012 NAGPUR NAGRIK SAHAKARI BANK LT D. . FOR SALES) CATEGORY TO HTM (HELD TO MATURITY) CATEG ORY.DURING THE ASSESSMENT PROCEEDINGS, AO FOUND THAT ASSESSEE HAD DEBITED RS.5,08,74,645/- UN DER THE HEADAMORTIZATION, LOSS & DEPRECIATION OF GOVERNMENTS SECURITIES.HE DIRECTED THE ASSESSEE TO SUBMIT DETAILS ABOUT THE DEPRE -CIATION.ASSESSEE VIDE ITS LETTER DATED 24.11.2011 STATED THAT THE DEPRECIATION ON GOVERNMENT SECURITIES AMOUNTING TO RS. 4.01 CRORES ON TRANSFER OF SECURITIES FROM AFS TO HTM WAS CLAIMED, IT WAS SUBMITTED BY THE ASSESSEE THAT IT WAS A MULT I STATE SCHEDULED CO-OPERATIVE BANK, THAT AS PER THE GUIDELINES ISSUED BY THE RESERVE BANK OF IN DIA (RBI)REGARDING TRANSFER OF AFS CATEGORY INVESTMENTS INTO HTM CATEGORY INVESTMENT,ASSESSEE W AS ENTITLED TO CLAIM DEPRECIATION. 3 .AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, AO HELD THAT CBDT HAD ISSUED CIRCULAR NO. 665 ON 05.10.1993, THAT RBI GUIDELINES COULD NOT OV ERRIDE THE MANDATORY PROVISIONS OF INCOME TAX,THAT THE DEPRECIATION CLAIMED BY THE ASSESSEE O N INVESTMENT HELD IN PERMANENT CATEGORY COULD NOT BE ALLOWED TO BE DEDUCTED WHILE COMPUTING THE T AXABLE INCOME.AS A RESULT, DEPRECIATION ON GOVERNMENT SECURITIES AMOUNTING TO RS. 4.01 CRORES WAS DISALLOWED BY HIM. 4 .ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPE LLATE AUTHORITY (FAA). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDE R, FAA HELD 12 TYPE OF SECURITIES HAD BEEN SHIFTED FROM AFS TO HTM CATEGORY, THAT THE MAJORITY OF THE SECURITIES HAD BEEN PURCHASED IN THE FIRST QUARTER OF 2008 THAT AT THE TIME OF ACQUISITI ON OF THE SECURITIES ASSESSEE HAD TO TAKE A DECISIO N REGARDING THE TREATMENT TO BE ACCORDED TO THESE TRA NSACTIONS AND TO DECIDE THE CATEGORY OF PARTICULAR INVESTMENT, THAT THE METHOD AND BANNER O F VALUATION OF INVESTMENT OF DIFFERENT CATEGORIES HAD BEEN LAID DOWN, THAT ON SHIFTING OF CATEGORIES FROM AFS TO HTM THE ASSESSEE HAD ADOPTED THE DIFFERENCE BETWEEN THE BOOK VALUE AND T HE MARKET VALUE AS ON DIFFERENT SHIFTING OF RECORDS AND CONSIDERED THE DIFFERENCE AS DEPRECIATI ON, THAT IT DID NOT TAKE INTO CONSIDERATION THE FACT THAT THE MARKET VALUE OF AFS SECURITIES HAD AL READY BEEN REFLECTED IN THE ACCOUNTS AS ON THE LAST DATE OF THE ACCOUNTING YEAR, THAT THE ASSESSEE HAD TWEAKED THE PARAMETERS LAID DOWN BY RBI CIRCULAR IN ORDER TO CLAIM A DIMINUTION IN VALUE TH AT THE CATEGORY IN WHICH THE 123 TYPES OF SECURITIES WERE ORIGINALLY CLASSIFIED WAS THAT TO A FS AND SUCH SECURITIES WERE REQUIRED TO BE MARKED TO MARKET AS PER CIRCULAR ISSUED BY THE RBI, THAT ON SHIFTING OF SECURITIES FROM AFS NO DIFFERENCE WOULD BE EXPECTED TO ARISE, THAT THE ASS ESSEE HAD CLAIMED THE DIFFERENCE BETWEEN THE BOOK VALUE OF THE SECURITIES AND THE MARKED VALUE. 5. BEFORE US,AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ASSESSEE WAS FOLLOWING THE INSTRUCTIONS OF THE RBI WHILE DEALING WITH GOVERNMENT SECURITIE S,THAT AS PER THE CIRCULAR ISSUED BY THE CBDT DEPRECIATION WAS ALLOWABLE IF AN ASSESSEE WAS A DEA LER OF SUCH SECURITIES.HE RELIED UPON THE ORDER DELIVERED BY A BENCH OF PUNE IN THE CASE OF LATUR URBAN CO-OP. BANK LTD., (ITA NO.778/PN/ 2011 AY 2007-08 DT.31-08-2012).DEPARTMENTAL REPRESE NTATIVE (DR) RELIED UPON THE ORDERS OF THE FAA. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND GONE THROUG H THE MATERIAL PLACED BEFORE US.WE FIND THAT THE GUIDELINES OF THE BANK REGULATOR,RESERVE BANK OF IN DIA (RBI) ARE RELEVANT IN THIS CONTEXT, THAT AS PER THE RBI GUIDELINES (DT. 16 TH OCTOBER, 2000), THE INVESTMENT PORTFOLIOS OF THE B ANKS ARE REQUIRED TO BE CLASSIFIED UNDER THREE CATEGORIES VI Z. HELD TO MATURITY (HTM), HELD FOR TRADING (HFT)AND AVAILABLE FOR SALE (AFS), THAT INVESTMENTS CLASSIFIED UNDER HTM CATEGORY ARE NOT TO BE TREATED AS MARKED TO MARKET AND ARE TO BE CARRIED AT ACQUISITION COST UNLESS THESE ARE MORE THAN THE FACE VALUE, THAT IN SUCH CASES, THAT PREMIUM HA S TO BE AMORTISED OVER THE PERIOD REMAINING TO MATURITY,THAT THE CASES OF HFT AND AFS SECURITIES F ORM STOCK-IN-TRADE OF THE BANK, THAT THE DEPRECIATION/APPRECIATION IS TO BE AGGREGATED SCRIP -WISE AND ONLY NET DEPRECIATION IS REQUIRED TO BE PROVIDED FOR IN THE ACCOUNTS.WE ALSO FIND THAT CBDT ,VIDE ITS CIRCULAR NO.17 DT. 26-11-2008 (PARA VII) HAS DEALT THE ISSUE OF HTM (HELD TO MATURITY) CATEGORY SECURITIES IN THE FOLLOWING MANNER: 3 ITA NO. 393/NAG/2012 NAGPUR NAGRIK SAHAKARI BANK LT D. . AS PER RBI GUIDELINES DATED 16 TH OCTOBER, 2000, THE INVESTMENT PORTFOLIO OF THE BAN K IS REQUIRED TO BE CLASSIFIED UNDER THREE CATEGORIES VIZ. HELD T O MATURITY (HTM), HELD FOR TRADING (HFT) AND AVAILABLE FOR SALE (AFS).INVESTMENTS CLASSIFIED UND ER HTM CATEGORY NEED NOT BE MARKED TO MARKET AND RE CARRIED AT ACQUISITION COST UNLESS THESE ARE MORE THAN THE FACE VALUE, IN WHICH CASE THE PREMIUM SHOULD BE AMORTIZED OVER THE PERIOD REMAINI NG TO MATURITY. IN THE CASE OF HFT AND AFS SECURITIES FORMING STOCK IN TRADE OF THE BANK, THE DEPRECIATION/APPRECIATION IS TO BE AGGREGATED SCRIP WISE AND ONLY NET DEPRECIATION,IF ANY,IS REQU IRED TO BE PROVIDED FOR IN THE ACCOUNTS.THE LATEST GUIDELINES OF THE RBI MAY BE REFERRED TO FOR ALLOWI NG ANY SUCH CLAIMS. FROM THE ABOVE IT IS CLEAR THAT THE ASSESSEE-BANK W AS FOLLOWING THE GUIDELINES AND INSTRUCTION ISSUED BY THE RBI AND THE TREATMENT GIVEN BY IT IN THE BOOKS OF ACCOUNTS WAS ALSO AS PER THE ABOVE REFERRED CIRCULAR OF THE CBDT.IN THESE CIRCUMSTANCE S, REVERSING THE ORDER OF THE FAA,WE DECIDE GROUND NO.2-3 IN FAVOUR OF THE ASSESSEE. AS A RESULT,APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. 6 /7 #6/ 8 2 9 ': ' / ;. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH FEBRUARY, 2014. 2!3 1* ! ( 10 =0 , 2014 . SD/- SD/- (H.L.KARWA/ % %% % . . ) ( '!() '!() '!() '!() / RAJENDRA) PRESIDENT/ '& ! ! ! ! 24 24 24 24 /ACCOUNTANT MEMBER / MUMBAI, 2 /DATE: 10.02.2014 SK 2!3 2!3 2!3 2!3 -/ -/ -/ -/ >!*/ >!*/ >!*/ >!*/ / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / +, 2. RESPONDENT / -.+, 3. THE CONCERNED CIT(A)/ ? @ , 4. THE CONCERNED CIT / ? @ 5. DR ITAT,NAGPUR BENCH/ A -/ , . . ( . - . 6. GUARD FILE/ # = . . / -/ //TRUE COPY// 2!3 / BY ORDER, B / ' DY./ASST. REGISTRAR , /ITAT, MUMBAI.