The Dy. Commr. Of Income Tax, Cir.-1(2), RAJKOT-GUJARAT V. Rajkot Peoples Co. Op. Bank Ltd., RAJKOT-GUJARAT

ITA 415/RJT/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8911 (ITAT-RAJKOT)
• Duration Of Justice: 2 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 06-07-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 10-09-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARGOVIND SINGH
• Assessee Lawyers: DM RINDANI
• Keywords: Capital asset; Depreciation; Question of law; Unabsorbed depreciation
• Section: 142(1); 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI RAJPAL YADAV, JUDICIAL MEMBER SR. NO. ITA NO. & ASSTT.YEAR APPELLANT RESPONDENT 1 - 2 36/RJT/2014 WITH CO NO.1/RJT/2014 ASSTT.YEAR 2011-11 DCIT, CIR.1(2) RAJKOT. THE CO - OP. BANK OF RAJKOT LTD. SAHAKAR SARITA, PANCHANATH ROAD, RAJKOT. 3 - 4 308/RJT/2014 WITH CO NO.14/RJT/2014 ASSTT.YEARS: 2009-10 ACIT, CIR.1 RAJKOT. THE CO - OP. BANK OF RAJKOT LTD. SAHAKAR SARITA, PANCHANATH ROAD, RAJKOT. PAN : AAAAT 2423 R 5 - 6 436/RJT/2015 WITH CO NO.59/RJT/2015 ASSTT.YEAR 2012-13 DCIT, CIR.1(2) RAJKOT. THE CO - OP. BANK OF RAJKOT LTD. SAHAKAR SARITA, PANCHANATH ROAD, RAJKOT. 7 543/RJT/2014 ASSTT.YEAR 2011-12 DCIT, CIR.1(2) RAJKOT. THE CO - OP. BANK OF RAJKOT LTD. SAHAKAR SARITA, PANCHANATH ROAD, RAJKOT. 8 404/RJT/2016 ASSTT.YEAR 2013-14 DCIT, CIR.1(2) RAJKOT. THE CO - OP. BANK OF RAJKOT LTD. SAHAKAR SARITA, PANCHANATH ROAD, RAJKOT. 9 415 /RJT/2015 ASSTT.YEAR: 2007-08 DCIT, CIR.1(2) RAJKOT. RAJKOT PEOPLES CO - OP.BANK LTD. SABHASAD BHAVAN, 1 MANHAR PLOT, GONDAL ROAD RAJKOT. / (APPELLANT) / (RESPONDENT) REVENUE BY : SHRI HARGOVIND SINGH, CIT-DR ASSESSEE BY : SHRI D.M. RINDANI, CA / DATE OF HEARING : 01/11/2017 / DATE OF PRONOUNCEMENT: 19/01/2018 / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: IN THIS GROUP OF APPEALS, REVENUE CHALLENGES ORDERS OF LD.CIT(A)-1, RAJKOT PASSED IN ASSESSMENT YEARS 2009-10 TO 2013-1 4 RESPECTIVELY. ON ITA NO.36/RJT/2014 AND 8 OTHERS WITH CO MS/.COOPERATIVE BANK OF RAJKOT VS. ACIT, CIR.1, RAJKO T 2 RECEIPT OF NOTICE IN THE REVENUES APPEAL, ASSESSEE HAS FILED CROSS OBJECTION IN THE ASSESSMENT YEARS 2009-10, 2010-11 AND 2012-1 3. ALONG WITH THESE APPEALS, WE HAVE HEARD APPEAL OF RAJKOT PEOPLES CO- OP. BANK LTD. I.E. ITA NO.415/RJT/2015, WHICH IS DIRECTED AT THE INSTANCE OF REVENUE AGAINST THE ORDER OF LD.CIT(A)-1, RAJKOT DATED 30.6.2015. 2. AS FAR AS APPEALS OF THE REVENUE ARE CONCERNED, WE FIND THAT REVENUE MAINLY CHALLENGES ORDERS OF THE LD.CIT(A ON TWO COU NTS, VIZ. (A) THE LD.CIT(A) HAS ERRED IN ALLOWING AMORTIZATION OF PRE MIUM PAID ON INVESTMENT, AND (B) TREATING THE ALLEGED ACCRUAL OF INTEREST ON NPA AS NOT TAXABLE. 3. FACTS ON ALL VITAL POINTS ARE COMMON. FOR THE F ACILITY OF REFERENCE, WE TAKE UP THE FACTS MAINLY FROM THE ASSESSMENT YEAR 2 009-10. THE ASSESSEE HAS AMORTIZED FOLLOWING AMOUNTS IN DIFFERENT ASSESSMENT YEARS ON ACCOUNT OF PREMIUM PAID ON INVESTMENTS. SR. NO. ASSTT.YEARS AMOUNT OF AMORTIZATION (RS.) 1. 2007-08 (IN THE CASE OF RAJKOT PEOPLES CO-OP BANK) 12,54,256/- IN THE CASE OF CO-OP. BANK OF RAJKOT LTD.: 2. 2009-10 80,75,000/- 3. 2010-11 1,04,61,642/- 4. 2011-12 1,11,46,927/- 5. 2012-13 1,09,71,040/- 6. 2013-14 6,51,72,778/- 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED ITS RETURN OF INCOME FOR THE ASSTT.YEAR 2009-10 ON 8.9.2009. THIS RETUR N WAS REVISED ON 22.3.2010 ITA NO.36/RJT/2014 AND 8 OTHERS WITH CO MS/.COOPERATIVE BANK OF RAJKOT VS. ACIT, CIR.1, RAJKO T 3 DECLARING TOTAL INCOME AT RS.16,40,74,590/-. THE C ASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE UNDER S ECTION 143(2) WAS ISSUED ON 23.8.2010 WHICH WAS SERVED UPON THE ASSESSEE. O N SCRUTINY OF THE ACCOUNTS, IT REVEALED TO THE AO THAT THE ASSESSEE H AS DEBITED A SUM OF RS.80,75,000/- ON ACCOUNT OF AMORTIZATION OF PREMIU M ON GOVERNMENT SECURITIES. THE LD.AO ISSUED A QUESTIONNAIRE VIDE SHOW CAUSE NOTICE DATED 11.7.2011 UNDER SECTION 142(1) OF THE ACT AND INVIT ED EXPLANATION OF THE ASSESSEE AS TO WHY THE AMOUNT DEBITED ON ACCOUNT OF AMORTIZATION OF PREMIUM ON GOVERNMENT SECURITIES SHOULD NOT BE DISA LLOWED. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEE HAS FILED A DET AILED REPLY WHICH HAS BEEN REPRODUCED BY THE AO ON PAGES 3 TO 7 OF THE ASSESSM ENT. RELEVANT PART OF THE REPLY READS AS UNDER: 'SUB: SHOW CAUSE U/S.142(1) OF THE INCOME-TAX ACT,1 961 FOR A.Y.2009- 10 WITH REFERENCE TO THE ABOVE, WE ARE TO STATE AS UND ER:- 1. THE BANK IS REGISTERED WITH THE GUJARAT ST ATE CO-OPERATIVE SOCIETIES ACT. AND A/SO HOLDING BANKING LICENCE UND ER BANKING REGULATION ACT 2. BANK IS ALSO GOVERNED BY THE PROVISIONS OF RESERVE BANK OF INDIA ACT, 1934 FOR THEIR WORKING OF BUSINESS AND BANK HA S TO FOLLOW THE REGULATIONS OF RESERVE BANK OF INDIA. 3. BANK HAS MADE INVESMENTS IN SECURITIES AS PER THE REGULATIONS OF RESERVE BANK OF INDIA AND ALL THE INVESTMENTS ARE T REATED AS STOCK IN TRADE. BUT CLASSIFICATION AND PROVISIONS ARE MADE A S PER THE GUIDELINE OF RESERVE BANK OF INDIA. 4. ... .... ..... ..... .......... 5.1 SECURITIES HELD BY THE BANK FOR COMPLYING WITH THE REQUIREMENTS OF MAINTAINING THE SLR AS REQUIRED UNDER THE PROVISION S OF THE BANKING REGULATIONS ACT, 1949 SHOULD BE CONSIDERED AS STOCK IN TRADE/ CURRENT ASSETS. ITA NO.36/RJT/2014 AND 8 OTHERS WITH CO MS/.COOPERATIVE BANK OF RAJKOT VS. ACIT, CIR.1, RAJKO T 4 5.2 AS PER THE PROVISIONS OF S.6 R/W S. 5(B) AND (C ) OF THE BANKING REGULATION ACT, TRANSACTION OF SECURITIES FORMS PAR T OF BANKING BUSINESS AND BANK CAN PURCHASE AND SELL SECURITIES WITHOUT A FFECTING THE STATUTORY SLR. THEREFORE THE SECURITIES PURCHASED A RE ACTUALLY STOCK IN TRADE. THEREFORE THE INVESTMENT IN SECURITIES ARE N OT IN REAL SENSE CAPITAL ASSETS. THE SAME TO BE CONSIDERED IN THE BA CK GROUND OF THE PROVISIONS OF BANKING REGULATIONS ACT. 5.3SECTION 6 OF BANKING REGULATION ACT, 1949, SPECI FIES THE FORMS OF BUSINESS IN WHICH THE BANKING COMPANIES MAY ENGAGE. IT PROVIDES THAT IN ADDITION TO THE BUSINESS OF BANKING, A BANKING C OMPANY MAY ENGAGE IN ANY ONE OR MORE BUSINESSES, NAMELY: 5.4'6(A) : THE BORROWING, RAISING OR TAKING UP OF M ONEY; LENDING OR ADVANCING OF MONEY EITHER UPON OR WITHOUT SECURITY; THE DRAWING, MAKING, ACCEPTING; DISCOUNTING, BUYING, SELLING, CO LLECTING AND DEALING IN BILLS OF EXCHANGE, HUNDIES, PROMISSORY NOTES, CO UPONS, DRAFTS, BILLS OF LADING, RAILWAY RECEIPTS, WARRANTS, DEBENTURES, CER TIFICATES, SCRIPS AND OTHER INSTRUMENTS, AND SECURITIES WHETHER TRANSFERA BLE OR NEGOTIABLE OR NOT; THE GRANTING AND ISSUING OF LETTERS OF CREDIT, TRAVELLER'S CHEQUES AND CIRCULAR NOTES; THE BUYING, SELLING AND DEALING IN BULLION AND SPECIE; THE BUYING AND SELLING OF FOREIGN EXCHANGE INCLUDIN G FOREIGN BANK NOTES; THE ACQUIRING, HOLDING, ISSUING ON COMMISSIO N, UNDERWRITING AND DEALING IN STOCK,FUNDS, SHARES, DEBENTURES, DEBENTU RES STOCK, BONDS, OBLIGATIONS, SECURITIES AND INVESTMENTS OF ALL KIND S; THE PURCHASING AND SELLING OF BONDS,SCRIPS OR OTHER FORMS OF SECURITIE S ON BEHALF OF CONSTITUENTS OR OTHERS, THE NEGOTIATING OF LOANS AN D ADVANCES; THE RECEIVING OF ALL KINDS OF BONDS, SCRIPS OR VALUABLE S ON DEPOSITS OR FOR SAFE CUSTODY OR OTHERWISE; THE PROVIDING OF SAFE DE POSIT VAULTS; THE AND TRANSMITTING OF MONEY AND SECURITIES: 5.5SECTION 24 OF THE BANKING REGULATION ACT PROVIDE S FOR MAINTENANCE OF A PERCENTAGE OF ASSETS AND ACCORDINGLY EACH BANK HAS TO INVEST IN SECURITIES AND TO MAINTAIN SUCH PERCENTAGE. 5.6 BANK IS NOT AT ALL ENGAGED IN PURCHASE AND SALE OF SECURITIES AND THAT BANK HAD INVESTED MONEY IN GOVERNMENT SECURITI ES ONLY FOR THE PURPOSE OF COMPLYING WITH THE PROVISIONS OF THE BAN KING REGULATION ACT FOR THE MAINTAINING THE SLR. 5.7SECURITIES HELD UNDER ANY CATEGORIES EVEN HELD T O MATURITY BY THE BANK ARE STOCK IN TRADE AND THEREFORE ANY NOTIONAL LOSS SUFFERED ON ITA NO.36/RJT/2014 AND 8 OTHERS WITH CO MS/.COOPERATIVE BANK OF RAJKOT VS. ACIT, CIR.1, RAJKO T 5 SECURITIES AT THE CLOSED OF THE YEAR ON THE BASIS O F GUILELINE PRESCRIBED BY RESERVE BANK OF INDIA SHOULD BE ALLOWABLE AS DED UCTION. 5.8 INCOME FROM THE SECURITIES IS A PART OF THE BAN KING BUSINESS AND THEREFORE THE INCOME FROM SECURITIES ARE SHOWN UNDE R THE UNDER THE HEAD OF BUSINESS OR PROFESSION. THE SAME SHOULD BE CONSIDERED. 5.9 IT IS TO BE SUBMITTED THAT EVERY YEAR BANK FOLL OWS THE ACCOUNTING METHOD AS PRESCRIBED BY RESERVE BANK OF INDIA FOR V ALUATION OF INVESTMENT/STOCK IN TRADE CONSISTENTLY AND INCOME F ROM INVESTMENT/STOCK IN TRADE TREATED AS BUSINESS INCOM E CONSISTENTLY. 5. THE LD.AO WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE AND HE DISALLOWED THE CLAIM MADE BY THE ASSESSEE. ON IDEN TICAL PRINCIPLE, THE DISALLOWANCE HAS BEEN MADE IN OTHER ASSESSMENT YEAR S AS WELL AS IN THE CASE OF RAJKOT PEOPLES CO-OP. BANK. ON APPEAL, THE LD.C IT(A) HAS DELETED THE DISALLOWANCE. 6. BEFORE US, THE LD.COUNSEL FOR THE ASSESSEE CONTE NDED THAT ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASSESS EE BY ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE. HE PLACED ON RECORD COPY OF THE TRIBUNAL ORDER PASSED IN ITA NO.914/RJT/2010 IN THE ASSTT.YEAR 2007-08. T HE LD.COUNSEL FOR THE ASSESSEE FURTHER CONTENDED THAT SIMILAR ISSUE WAS R AISED IN THE RAJKOT DIST. CO. BANKS CASE AND THE DISPUTE TRAVELLED UPTO THE HON BLE GUJARAT HIGH COURT IN TAX APPEAL NO.56 OF 2013. THE HONBLE HIGH COURT H AS CONSIDERED THE FOLLOWING QUESTIONS: (I) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE APPELLATE TRIBUNAL IS JUSTIFIED IN HOLDING THAT THE A.O. AND CIT(A) HAVE ERRED IN DISALLOWING THE AMORTIZATION OF SECUR ITY PREMIUM OF RS.40,30,000/- ? (II) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE APPELLATE TRIBUNAL IS JUSTIFIED IN NOT CONSIDER ING THAT THE SECURITIES HELD UNDER 'HELD TO MATURITY (HTM) CATEGORY' AS PER RBI GUIDELINES ITA NO.36/RJT/2014 AND 8 OTHERS WITH CO MS/.COOPERATIVE BANK OF RAJKOT VS. ACIT, CIR.1, RAJKO T 6 ARE NOT MEANT TO EARN PROFIT BUT ARE REQUIRED TO BE KEPT AS THEY ARE TILL MATURITY? 7. THESE QUESTIONS HAVE BEEN DECIDED IN FAVOUR OF T HE ASSESSEE, AND IT WAS HELD THAT IF A BANK HAS MADE INVESTMENT AND TREATED THESE SECURITIES UNDER HELD TO MATURITY CATEGORY, THEN PREMIUM PAID ON A CQUISITION OF SUCH SECURITIES WOULD BE AMORTIZED OVER THE PERIOD REMAI NING TO MATURITY. THE ASSESSEE HAS ADOPTED SIMILAR EXERCISE. THE DISCUSS ION MADE BY THE HONBLE HIGH COURT READS AS UNDER: 6. ON THE OTHER HAND, THE LEARNED COUNSEL SHRI TUS HAR HEMANI FOR THE RESPONDENT PLACED HEAVY RELIANCE ON THE SAID CBDT C IRCULAR DATED NOVEMBER 26, 2 008 AND CONTENDED THAT THE BENEFIT O F AMORTISATION HAD TO BE GRANTED. THE ASSESSEE AS A COOPERATIVE WAS BO UND BY THE RBI DIRECTIVES. AS PER SUCH DIRECTIVES, THE ASSESSEE HA D TO INVEST CERTAIN AMOUNTS IN GOVERNMENT SECURITIES AND TO HOLD THE SA ME TILL MATURITY. IN THE PROCESS OF ACQUISITION, IF THERE WAS ANY PREMIU M PAID ON THE FACE VALUE OF THE SECURITY, THE LOSS HAD TO BE AMORTISED . PARAGRAPH (VII) OF THE CIRCULAR NO. 17 OF 2008 DATED NOVEMBER 26, 2008 WOULD APPLY. SUCH INSTRUCTION READS '(VII) AS PER RBI GUIDELINES DATED 16TH OCTOBER, 20 00, THE INVESTMENT PORTFOLIO OF THE BANKS IS REQUIRED TO BE CLASSIFIED UNDER THREE CATEGORIES VIZ. HELD TO MATURITY (HTM), HELD FOR TRADING (HFT) AND AVAILABLE FOR SALE (AFS). INVESTMENTS CLASSIFIED UNDER HTM CATEGO RY NEED NOT BE MARKED TO MARKET AND ARE CARRIED AT ACQUISITION COS T UNLESS THESE ARE MORE THAN THE FACE VALUE, IN WHICH CASE THE PREMIUM SHOULD BE AMORTISED OVER THE PERIOD REMAINING TO MATURITY. IN THE CASE OF HFT AND AFT SECURITIES FORMING STOCK-IN-TRADE OF THE BA NK, THE DEPRECIATION/ APPRECIATION IS TO BE AGGREGATED SCRI P-WISE AND ONLY NET DEPRECIATION, IF ANY, IS REQUIRED TO BE PROVIDED FO R IN THE ACCOUNTS. THE LATEST GUIDELINES OF THE RBI MAY BE REFERRED TO FOR ALLOWING ANY SUCH CLAIMS. 7. THE INSTRUCTIONS CLEARLY PROVIDE FOR AMORTISATIO N OF PREMIUM PAID ON ACQUISITION OF SECURITIES WHEN THE SAME ARE ACQUIRE D AT THE RATE HIGHER THAN THE FACE VALUE. SUCH AMORTISATION WOULD HAVE T O BE FOR THE REMAINING PERIOD OF MATURITY. THIS PRECISELY THE TR IBUNAL HAD DIRECTED IN THE IMPUGNED ORDER. THOUGH CONTENDED, NO CONTRAR Y INSTRUCTIONS OF CBDT ARE BROUGHT TO OUR NOTICE. THE INSTRUCTION IN QUESTION HAVING ITA NO.36/RJT/2014 AND 8 OTHERS WITH CO MS/.COOPERATIVE BANK OF RAJKOT VS. ACIT, CIR.1, RAJKO T 7 BEEN ISSUED UNDER SECTION 119(2) OF THE INCOME-TAX ACT, 1961, / WOULD BIND THE REVENUE. NO QUESTION OF LAW, THEREFORE, AR ISES. 8. RESPECTFULLY FOLLOWING THE DECISION OF THE HONB LE HIGH COURT IN THE CASE OF RAJKOT DISTRICT CO-OP. BANK LTD. WE DO NOT FIND ANY MERIT IN THIS GROUND RAISED BY THE REVENUE IN ALL THESE ASSESSMEN T YEARS. THE LD.CIT(A) HAS RIGHTLY ALLOWED AMORTIZATION OF PREMIUM PAID ON THIS INVESTMENT. THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 9. IN THE NEXT FOLD OF GRIEVANCE THE REVENUE HAS PL EADED THAT THE LD.CIT(A) HAS ERRED IN NOT UPHOLDING ACTION OF THE AO OF TAXING INTEREST INCOME ON NPA ACCOUNT ON ACCRUAL BASIS. 10. IT EMERGES OUT FROM THE RECORD THAT THE LD.AO H AS WORKED INTEREST INCOME ON ACCRUAL BASIS ON THE NPA ACCOUNT IN DIFFE RENT YEARS AS UNDER: SR. NO. ASSTT.YEARS AMOUNT OF AMORTIZATION (RS.) 1. 2007-08 (IN THE CASE OF RAJKOT PEOPLES CO-OP BANK) 4,56,84,023/- IN THE CASE OF CO-OP. BANK OF RAJKOT LTD.: 2. 2009-10 58,31,100/- 3. 2010-11 50,70,382/- 4. 2011-12 1,91,35,903/- 5. 2012-13 7,79,96,240/- 6. 2013-14 6,51,72,778/- 11. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. WE FIND THAT THE ISSUE IN DISPUT E IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONB LE GUJARAT HIGH COURT ITA NO.36/RJT/2014 AND 8 OTHERS WITH CO MS/.COOPERATIVE BANK OF RAJKOT VS. ACIT, CIR.1, RAJKO T 8 RENDERED IN THE CASE OF TAX APPEAL NO. 324 OF 2007 AND OTHERS VIDE ORDER DATED 5.6.2017, HONBLE HIGH COURT HAS HELD THAT IN TEREST ON NPA IS NOT TAXABLE ON ACCRUAL BASIS IN VIEW OF GUIDELINES OF R ESERVE BANK OF INDIA. SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE BOMBAY H IGH COURT IN THE CASE OF CIT VS.DEOGIRI NAGARI SAHKARI BANK LTD. IN TAX A PPEAL NO.53 OF 2014 AND OTHERS. THE LD.CIT(A) HAS MADE REFERENCE TO RB I GUIDELINES WHILE HOLDING THAT INTEREST INCOME ON NPA ARE NOT TO BE R ECOGNISED AS TAXABLE INCOME ON THE BASIS OF ACCRUAL SYSTEM OF ACCOUNTING . RESPECTFULLY FOLLOWING DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF PR.CIT VS. SHRI MAHILA SEWA SAHAKARI BANK LTD. (2016) 72 TAXANN.COM 117 (GUJ), WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL. THIS GROU ND IS REJECTED. 12. CO NO.14 AND 1/RJT/2014. 13. IN THE ASSTT.YEAR 2009-10 AND 2010-1, THE ASSES SEE HAS FILED CO PLEADING THEREIN THAT THE LD.CIT(A) HAS ERRED IN UP HOLDING DISALLOWANCE MADE BY THE AO BY 4/5 TH OF EXPENDITURE CLAIMED BY THE ASSESSEE AS VRS SALA RY EXPENDITURE. 14. BRIEF FACTS OF THE CASE IN THE ASSTT.YEAR 2010- 11 ARE THAT THE ASSESSEE HAS DEBITED VRS SALARY EXPENDITURE OF RS.10,37,157/ - TO THE PROFIT AND LOSS ACCOUNT. THE LD.AO HAS DIRECTED THE AO TO EXPLAIN AS TO HOW TOTAL EXPENDITURE IS ADMISSIBLE IN VIEW OF SECTION 35DDA OF THE INCOME TAX ACT, 1961. THE ASSESSEE FAILED TO GIVE ANY EXPLANATION. ACCORDINGLY, THE LD.AO HAS ALLOWED 1/5 TH OF THE EXPENDITURE AND DISALLOWED THE REST. SIMIL ARLY, IN THE ASSTT.YEAR 2009-10, THE ASSESSEE HAS DEBITED A SUM OF RS. 4,53,678/- OUT OF RS.3,62,942/- BEING 4/5 TH WAS DISALLOWED BY THE AO. 15. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. WE FIND THAT SECTION 35DDA AUTHO RISES THE ASSESSEE TO ITA NO.36/RJT/2014 AND 8 OTHERS WITH CO MS/.COOPERATIVE BANK OF RAJKOT VS. ACIT, CIR.1, RAJKO T 9 CLAIM 1/5 TH OF THE EXPENDITURE INCURRED BY WAY OF PAYMENT TO A NY EMPLOYEES ON HIS VOLUNTARY RETIREMENT. THE LD.AO HAS RIGHTLY RESTRICTED THE ALLOWANCE TO 1/5 TH AND AMORTIZED THE TOTAL EXPENDITURE IN FIVE YEARS. 16. NO OTHER GROUND WAS RAISED IN THIS ASSESSMENT Y EAR. HENCE, CO I.E. 14/RJT/2014 AND 1/RJT/2014 ARE DISMISSED. 17. CO NO.59/RJT/2015: 18. IN THE ASSTT.YEAR 2012-12, THE ASSESSEE HAS FIL ED CO AND RAISED TWO GROUNDS OF CO. IN THE FIRST GROUND OF CO, THE ASSE SSEE HAS PLEADED THAT THE LD.CIT(A) HAS ERRED IN UPHOLDING ADDITION OF RS.83, 352/- MADE BY THE AO UNDER SECTION 14A OF THE ACT. 19. BRIEF FACTS OF THE CASE ARE THAT ON SCRUTINY OF ACCOUNTS IT REVEALED TO THE AO THAT THE ASSESSEE HAS CLAIMED AN AMOUNT OF RS.2, 15,361/- AS AN EXEMPT UNDER SECTION 10(34) OF THE ACT. THE LD.AO IN A BR IEF FINDING OBSERVED THAT THE EXPENDITURE ATTRIBUTABLE TO EARNING OF THIS EXE MPT INCOME DESERVES TO BE DISALLOWED UNDER SECTION 14A OF THE ACT R.W.S RULE 8D OF IT RULES. HE WORKED OUT A SUM OF RS.83,352/- FOR DISALLOWANCE. ON APPEAL, THE LD.CIT(A) HAS CONFIRMED DISALLOWANCE. 20. BEFORE US, THE LD.COUNSEL FOR THE ASSESSEE CONT ENDED THAT INVESTMENT OF RS.1,66,70,477/- WAS MADE BY THE ASSESSEE IN UTI MU TUAL FUND. THIS INVESTMENT WAS SAME AS ON 31.3.2011. THE ASSESSEE HAS INTEREST FREE FUNDS OF MORE THAN RS.185 CRORES. THERE IS AN INCREASE IN C APITAL AS WELL AS RESERVES AND SURPLUS IN THIS YEAR FROM RS.168 CRORES TO RS.1 85 CRORES. THEREFORE, NO INTEREST BEARING FUND WERE USED BY THE ASSESSEE. O N THE OTHER HAND, THE LD.DR POINTED OUT THAT NO SUCH ARGUMENTS WERE RAISED BY T HE ASSESSEE BEFORE THE ITA NO.36/RJT/2014 AND 8 OTHERS WITH CO MS/.COOPERATIVE BANK OF RAJKOT VS. ACIT, CIR.1, RAJKO T 10 LD.REVENUE AUTHORITIES BELOW. THE ASSESSEE FAILED TO IMPUGN THE DISALLOWANCE WORKED OUT BY THE AO ON THE BASIS OF AVERAGE INVEST MENT. 21. ON DUE CONSIDERATION OF ABOVE FACTS AND CIRCUMS TANCES, WE ARE OF THE VIEW THAT THESE DETAILS HAVE NOT BEEN DISCUSSED EIT HER IN THE ASSESSMENT ORDER OR BEFORE THE LD.CIT(A). THE LD.AO HAS MADE A ROUG H ESTIMATED DISALLOWANCE OF RS.83,352/-. AFTER GOING THROUGH THE ORDERS OF THE REVENUE AUTHORITIES BELOW, WE DO NOT FIND ANY ERROR BECAUSE SUBSTANTIAL INVESTMENTS HAVE BEEN MADE AND SOMEONE MUST HAVE LOOKED AFTER OF THESE IN VESTMENTS IN THE BANK. HENCE, THIS GROUND OF CO IS REJECTED. 22. IN THE NEXT GROUND OF CO, THE ASSESSEE HAS PLEA DED THAT THE LD.CIT(A) HAS FAILED TO ADJUDICATE THE ISSUE ON MERIT IN RESP ECT OF ALLOWABILITY/SET OFF OF BROUGHT FORWARD LOSS OF AMALGAMATED BANK WITH THE A SSESSEE. 23. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE H AS SHOWN A SUM OF RS.19,96,03,040/- AS INCOME FROM THE PROFIT AND GAI NS OF BUSINESS. DAKOR NAGRIK SAHAKARI BANK LTD., AND YAWAL PEOPLES CO-OP. BANK LTD. HAVE BEEN AMALGAMATED WITH THE ASSESSEE IN THE ASSTT.YEAR 201 2-13. IN OTHER WORDS, THESE TWO BANKS MERGED WITH THE ASSESSEE. DAKOR NA GRIK SAHAKARI BANK LTD. WAS HAVING FOLLOWING BROUGHT FORWARD BUSINESS LOSS: A.Y. AMOUNT OF B/F LOSSES 2005-06 RS.12,79,848 2006-07 RS.27,89,275/- 2009-10 RS.7,86,489/- 2011-12 RS.26,65,435/- TOTAL RS.75,21,047/- ITA NO.36/RJT/2014 AND 8 OTHERS WITH CO MS/.COOPERATIVE BANK OF RAJKOT VS. ACIT, CIR.1, RAJKO T 11 24. THE LD.AO HAS OBSERVED THAT SINCE, DAKOR NAGRIK SAH. BANK LTD. WAS A COOPERATIVE BANK AND IT HAD FILED ITS RETURN OF INC OME IN THE CAPACITY AS COOPERATIVE SOCIETY, IT CLAIMED EXEMPTION UNDER SEC TION 80P(2)(A)(I) OF THE INCOME TAX ACT. SECTION 72AA OF THE ACT WAS NOT AP PLICABLE TO COOPERATIVE BANK, AND THEREFORE, UNABSORBED DEPRECIATION AND AC CUMULATED LOSS WERE NOT ADMISSIBLE ON AMALGAMATION. THIS SECTION WAS APPLI CABLE TO BANKING COMPANY IN CERTAIN CASES AND NOT ON COOPERATIVE BAN K. HE FURTHER OBSERVED THAT W.E.F. 1.4.2008 SECTION 72AB HAS BEEN INCORPOR ATED WHICH ALLOWS BROUGHT FORWARDED BUSINESS LOSS AND DEPRECIATION OF ERSTWHILE COOPERATIVE BANK AGAINST INCOME OF THE AMALGAMATED BANK. IN TH IS WAY, THE LD.AO HAS HELD THAT LOSS FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07 TOTALLING TO RS.40,69,123/- CANNOT BE SET OFF FOR BROUGHT FORWAR D BUSINESS LOSS AGAINST THE INCOME OF THE ASSESSEE. ACCORDINGLY, HE DISALLOWED CLAIM OF THE ASSESSEE TO THE EXTENT OF RS.40,69,123/- AS AGAINST RS.1,33,14, 268/-. ON APPEAL, THE LD.CIT(A) HAS NOT RECORDED ANY FINDING ON THIS ISSU E. THE FINDING RECORDED BY THE LD.CIT(A) READS AS UNDER: 6.3 SO FAR AS DISALLOWANCE/ADDITION OF CARRIED FOR WARD LOSS OF DAKOR NAGRIK SAHAKARI BANK LTD. (THE AMALGAMATED CO-OPERA TIVE BANK) IS CONCERNED, I AM INCLINED TO AGREE WITH THE APPELLAN T'S CONTENTION THAT THE ACCUMULATED OR BROUGHT FORWARD LOSS OF A.Y.2005-06 & 2006-07 IS VERY MUCH ALLOWABLE AS PER PROVISIONS OF SEC.72AB INTROD UCED W.E.F. 01-04-2008, BECAUSE THE MERGER/AMALGAMATION HAS HAPPENED IN F.Y . 2011-12 (AFTER 1-4- 2008). HOWEVER, THIS IS ALLOWED TO CERTAIN CONDITIO NS ENUMERATED IN PROVISIONS OF SEC.72AB(2). THE A.O. IS DIRECTED TO ALLOW THIS LOSS IF CONDITIONS ARE FULFILLED. 25. GRIEVANCE OF THE ASSESSEE IS THAT THE LD.CIT(A) HAS NOT DECIDED THE ISSUE ON MERIT AFTER CONSIDERING THE RELEVANT DETAI LS. ON DUE CONSIDERATION OF THE ABOVE FACTS, WE ARE OF THE VIEW THAT THE LD.CIT (A) HAS NOT DEALT WITH THE ISSUE, RATHER REJECTED THE CONTENTION OF THE ASSESS EE IN CURSORY WAY. THE UNABSORBED DEPRECIATION AND LOSSES OF ASSTT.YEARS 2 005-06 AND 2006-07 WOULD BECOME THE LOSS OF ASSTT.YEAR 2007-08 AND THE REAFTER WILL BE CARRIED ITA NO.36/RJT/2014 AND 8 OTHERS WITH CO MS/.COOPERATIVE BANK OF RAJKOT VS. ACIT, CIR.1, RAJKO T 12 FORWARD TO OTHER YEARS. IT HAS TO BE DECIDED HOW I T IS NOT ADMISSIBLE. THEREFORE, WE SET ASIDE THE ORDER OF THE LD.CIT(A) AND RESTORE THIS ISSUE TO THE FILE OF THE LD.CIT(A) FOR RE-ADJUDICATION. THIS GR OUND OF CO IS ALLOWED FOR STATISTICAL PURPOSE. 26. IN THE REVENUES APPEAL FOR THE ASSTT.YEAR 2013 -14 I.E. 404/RJT/2016, THERE IS ONE MORE GROUND, WHEREBY, REVENUE HAS PLEA DED THAT THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.3,93,541/- . 27. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE H AS EARNED COMMISSION INCOME FROM INSURANCE BUSINESS. THE LD/AO FOUND DI SCREPANCY IN THE DETAILS SUBMITTED IN FORM NO.26AS. THE LD.AO HAS WORKED OU T ALL THESE DISCREPANCY AND HELD THAT A SUM OF RS.3,93,541/- WAS NOT RECOGN ISED BY THE ASSESSEE AS COMMISSION INCOME. HE WAS OF THE OPINION THAT THE ASSESSEE HAS CLAIMED TDS ON ENTIRE COMMISSION INCOME WITHOUT ACCOUNTING COMMISSION RECEIPTS. THE LD.CIT(A) HAS OBSERVED THAT THE ASSESSEE HAS BE EN RECOGNISING THE COMMISSION INCOME ON CASH BASIS REGULARLY. THUS, A CCORDING TO THE LD.CIT(A) THERE IS NO NEED TO TAX THIS RECEIPT ON MERCANTILE SYSTEM OR ACCOUNTANCY. THUS, AFTER CONSIDERING THE FINDING OF THE LD.CIT(A ) WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD.CIT(QA). THIS GROUND OF APP EAL IS REJECTED. 28. IN THE RESULT APPEALS OF THE REVENUE AND CROSS OBJECTIONS OF THE ASSESSEE ARE DISMISSED EXCEPT CO OF THE ASSESSEE IN THE ASSTT.YEAR 2012-13, WHICH IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 19 TH JANUARY, 2018 AT AHMEDABAD. SD/- SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 19/01/2018