Dy.CIT, Circle-2, Kolhapur V. The Sindhudurg District Central Co.op. Bank Ltd., Sindhudurg

ITA 407/PUN/2013

• Counselvise Citation: 40724514 RSA 2013
• Duration Of Justice: 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 08-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: WALIMBE
• Assessee Lawyers: SUS HANT PHADNIS
• Keywords: Capital asset; Depreciation; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.407/PN/2013 A.Y. 2009-10 DY. COMMISSIONER OF INCOME TAX, CIRCLE 2, KOLHAPUR APPELLANT VS. THE SINDHUDURG DISTRICT CENTRAL CO.OP. BANK LTD., A/P: SINDHUDURG NAGARI, TAL-KUDAL, SINDHUDURG DIST. PAN:AABAT4262F RESPONDENT APPELLANT BY : SHRI WALIMB E RESPONDENT BY : SHRI SUS HANT PHADNIS DATE OF HEARING: 24.10.2013 DATE OF ORDER : 28.10.2013 ORDER PER SHAILENDRA KUMAR YADAV, JM THIS APPEAL HAS BEEN FILED BY REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) [(IN SHORT CIT (A)], KOLHAPUR, DATED 27-11-2012 FOR A.Y. 2009-10 ON THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE HON'BLE CIT (A) IS NOT JUSTIFIED IN ALLOWING THE CL AIM OF ASSESSEE REGARDING AMORTIZATION OF PREMIUM PAID ON GOVERNMENT SECURITIES PURCHASED IN ACCORDANCE WITH THE RESERVE BANK OF INDIA GUIDELINES AND MASTER CIRCULA R ON 2 INVESTMENT ISSUED BY RESERVE BANK OF INDIA ON 02-07 -2006 WHICH, IN FACT DO NOT SUPERSEDE THE PROVISIONS OF I NCOME TAX ACT AND ARE NOT BINDING ON THE DEPARTMENT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT (A) ERRED IN ALLOWING DEPRECIATION ON INVESTMEN T IN GOVERNMENT SECURITIES WHICH CAN BE CLAIMED ONLY O N BUSINESS ASSETS AND NOT ON INVESTMENT IGNORING THE DEPARTMENT'S CONSISTENT STAND THAT DEPRECIATION IN VALUE OF SECURITIES IS ALLOWABLE IN CASES WHERE SECURITIES A RE HELD AS STOCK IN TRADE AND NOT AS CAPITAL INVESTMENT IN THE FORM OF HTM. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE O F THE CIT (A) ERRED IN ALLOWING AMORTIZATION OF PREMIUM P AID ON GOVERNMENT SECURITIES PURCHASED BY ASSESSEE IGNORIN G THE LEGAL PROVISIONS THAT ALL CAPITAL ASSETS ARE TO BE VALUED AT COST ONLY AND NO PART THEREOF CAN BE CLAIMED AS REV ENUE EXPENDITURE IN COMPUTING TOTAL INCOME. 4. THE APPELLANT PRAYS THAT THE ORDER OF THE COMMISSIO NER OF INCOME TAX (APPEALS), KOLHAPUR BE VACATED AND TH AT OF THE ASSESSING OFFICER BE RESTORED. 2. THE ASSESSEE BANK IS ENGAGED IN THE BUSINESS OF BANKING. THE ONLY ISSUE BEFORE US RELATES WITH REGARD TO ADD ITION OF RS.38,25,000/- ON ACCOUNT OF AMORTIZATION OF SECURI TIES AS PER RESERVE BANK OF INDIA DIRECTIONS. ASSESSING OFFICE R DISALLOWED THE SAME AND MADE ADDITION OF RS.38,25,000/- ON ACC OUNT OF AMORTIZATION OF SECURITIES. IN APPEAL, CIT(A) DELE TED THE ADDITION IN QUESTION BY OBSERVING THAT AS PER GUIDELINES OF RESERVE BANK OF INDIA, THE CLAIM OF ASSESSEE TOWARDS PROVISION O F DEPRECIATION ON FRESH INVESTMENT OVER THE LIFE OF SECURITY PURCH ASED AND 3 AMORTIZED AND PREMIUM IN RESPECT OF SECURITY SHIFTE D TO HTM CATEGORY IS ALLOWABLE AS DEDUCTABLE EXPENSES. THIS VIEW IS ALSO FORTIFIED BY THE DECISION OF ITAT, PUNE BENCH B I N ITA NO.1254/PN/2011 IN CASE OF DY. CIT, CIRCLE-1, NASHI K VS. NASHIK MERCHANT CO-OPERATIVE BANK LTD., WHEREIN, SI MILAR ISSUE HAS BEEN DECIDED IN FAVOUR OF ASSESSEE BY HOLDING A S UNDER: 8. THE ITAT, MUMBAI BENCH, IN THE CASE OF ACIT VS. THE BANK OF RAJASTHAN LTD., (2011) TIOL-35-ITAT-MUMBAI, HAS HELD THAT IN CASE OF BANKS, THE PREMIUM PAID IN EXC ESS OF FACE VALUE OF INVESTMENTS CLASSIFIED UNDER HTM CATE GORY WHICH HAS BEEN AMORTISED OVER THE PERIOD TILL MATUR ITY IS ALLOWABLE AS REVENUE EXPENDITURE SINCE THE CLAIM IS AS PER RBI GUIDELINES AND CBDT ALSO HAS DIRECTED TO ALLOW SUCH PREMIUM. IT HAS ALSO BEEN HELD IN THE CASE OF CATH OLIC SYRIAN BANK LTD. VS. ACIT THAT AMORTIZATION ON PURC HASE OF GOVERNMENT SECURITIES WAS MADE AS PER PRUDENTIAL NO RMS OF THE RBI AND SAME WAS ALLOWABLE DEDUCTION. IN VI EW OF ABOVE, ASSESSEE WAS JUSTIFIED IN CONTENDING FOR AMO RTIZATION OF PREMIUM PAID IN EXCESS OF FACE VALUE OF SECURITI ES HELD TO MATURITY (HTM) CATEGORY OR PERIOD REMAINING TILL MA TURITY WAS FOUND REASONABLE BY THE CIT(A). ACCORDINGLY AD DITION OF RS.17,91,659/- MADE BY THE ASSESSING OFFICER BY DISALLOWING AMOUNT TOWARDS AMORTIZATION OF GOVERNME NT SECURITIES (HMT) WAS 6 DELETED. THIS REASONED FACT UAL AND LEGAL FINDING OF THE CIT(A) NEEDS NO INTERFERENCE F ROM OUR SIDE. WE UPHOLD THE SAME. 9. AS A RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE ON BE HALF OF REVENUE. FACTS BEING SIMILAR, SO FOLLOWING THE SAM E REASONING, 4 WE ARE NOT INCLINED TO INTERFERE IN THE FINDINGS OF CIT(A), WHO HAD DELETED THE ADDITION MADE BY ASSESSING OFFICER BY D ISALLOWING AMOUNT TOWARDS AMORTIZATION OF GOVERNMENT SECURITIE S (HMT). 3. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. PRONOUNCED IN THE OPEN COURT ON THE DAY OF 28 TH OCTOBER 2013. SD/- SD/- (R.K. PANDA) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 28 TH OCTOBER 2013 GCVSR COPY TO:- 1) DEPARTMENT 2) ASSESSEE 3) THE CIT(A), KOLHAPUR 4) THE CIT, KOLHAPUR 5) THE DR, B BENCH, I.T.A.T., PUNE. 6) GUARD FILE //TRUE COPY// BY ORDER SENIOR PRIVATE SECRETARY, I.T.A.T., PUNE