Appeal details
Counselvise Citation
[2016] 130 COUNSELVISE.COM (IT) 9824 (ITAT-VISAKHAPATNAM)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 year(s) 9 month(s) 23 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
30-09-2016
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
DB
Next Hearing Date
07-12-2015
Assessment Year
2009-2010
Appeal Filed On
07-12-2012
Judgement Text
ITA NOS.444, 445, 449 & 450/VIZAG/2012;COO 5&6/VIZA G/2013; ITA 726/VIZAG/2013; ITA 2&38/VIZAG/2014 VISAKHAPATNAM CO-OP. BANK LTD., VISAKHAPATNAM 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.444/VIZAG/2012 ( / ASSESSMENT YEAR: 2008-09) VISAKHAPATNAM CO - OP. BANK LTD., VISAKHAPATNAM VS. ADDL. CIT, RANGE - 1, VISAKHAPATNAM [PAN: AAAAT 0844L ] ( % / APPELLANT) ( &'% / RESPONDENT) ./I.T.A.NO.445/VIZAG/2012 ( / ASSESSMENT YEAR: 2009-10) VISAKHAPATNAM CO - OP. BANK LTD., VISAKHAPATNAM VS. JCIT, RANGE - 1, VISAKHAPATNAM ( % / APPELLANT) ( &'% / RESPONDENT) ./I.T.A.NO.449&450/VIZAG/2012 ( / ASSESSMENT YEAR: 2008-09 & 2009-10) ACIT, CIRCLE - 1(1), VISAKHAPATNAM VS. VISAKHAPATNAM CO - OP. BANK LTD., VISAKHAPATNAM ( % / APPELLANT) ( &'% / RESPONDENT) ITA NOS.444, 445, 449 & 450/VIZAG/2012;COO 5&6/VIZA G/2013; ITA 726/VIZAG/2013; ITA 2&38/VIZAG/2014 VISAKHAPATNAM CO-OP. BANK LTD., VISAKHAPATNAM 2 C.O. NOS.5&6/VIZAG/2013 (ARISING OUT OF I.T.A.NO.449&450/VIZAG/2012) ( / ASSESSMENT YEAR: 2008-09 & 2009-10 RESPECTIVELY) VISAKHAPATNAM CO - OP. BANK LTD., VISAKHAPATNAM VS. ACIT, CIRCLE - 1(1), VISAKHAPATNAM ( % / APPELLANT) ( &'% / RESPONDENT) ./I.T.A.NO.726/VIZAG/2013 ( / ASSESSMENT YEAR: 2010-11) VISAKHAPATNAM CO - OP. BANK L TD., VISAKHAPATNAM VS. ADDL. CIT, RANGE - 1, VISAKHAPATNAM ( % / APPELLANT) ( &'% / RESPONDENT) ./I.T.A.NOS.2 & 38/VIZAG/2014 ( / ASSESSMENT YEAR: 2010-11) ACIT, CIRCLE - 1(1), VISAKHAPATNAM VS. VISAKHAPATNAM CO - OP. BANK LTD., VISAKHAPATNAM ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI G.V.N. HARI, AR / RESPONDENT BY : SHRI M .B. REDDY, DR / DATE OF HEARING : 21.07.2016 / DATE OF PRONOUNCEMENT : 30.09.2016 ITA NOS.444, 445, 449 & 450/VIZAG/2012;COO 5&6/VIZA G/2013; ITA 726/VIZAG/2013; ITA 2&38/VIZAG/2014 VISAKHAPATNAM CO-OP. BANK LTD., VISAKHAPATNAM 3 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: THESE THREE APPEALS FILED BY THE ASSESSEE, FOUR AP PEALS FILED BY THE REVENUE AND TWO CROSS OBJECTIONS FILED BY THE A SSESSEE ARE DIRECTED AGAINST SEPARATE, BUT IDENTICAL ORDERS OF THE CIT( A), VISAKHAPATNAM DATED 27.09.2012 FOR THE ASSESSMENT YEAR 2008-09, 2 009-10 & 2010-11. SINCE, THE FACTS ARE IDENTICAL AND ISSUES ARE COMMO N, THEY ARE HEARD TOGETHER AND DISPOSED OFF, BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO.444/VIZAG/2012 (ASSESSEES APPEAL FOR A.Y. 2008-09) C.O. NO.5/VIZAG./2013 (ASSESSEES APPEAL FOR A.Y. 2 008-09 : 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: GROUND NO.1: THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), VISAKHAPATNAM [CIT(A)] IS CONTRARY TO TH E FACTS AND LAW APPLICABLE TO THE CASE AND CIRCUMSTANCES OF THE APP ELLANT. GROUND NO.2: THE LEARNED CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER, IN DISALLOWING PROVISION CREATED FOR STAFF GRATUITY OF 20,00,000/-. GROUND NO.3: THE LEARNED CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER, IN DISALLOWING PROVISION FOR STANDARD ASSETS OF ` 30,87,213/-. GROUND NO.4: THE LEARNED CIT(A) IS NOT JUSTIFIED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER, IN DISALLOWING THE AMORTI ZATION OF LOSS ON ACCOUNT OF MERGER OF BOBBILI CO-OPERATIVE URBAN BANK, AMOUN TING TO ` 1, 56,70,500/-, BEING ONE FIFTH OF THE TOTAL AMOUNT OF ` 7,83,52,408/- I.E. EXCESS OF LIABILITIES OVER THE ASSETS TAKEN OVER. ITA NOS.444, 445, 449 & 450/VIZAG/2012;COO 5&6/VIZA G/2013; ITA 726/VIZAG/2013; ITA 2&38/VIZAG/2014 VISAKHAPATNAM CO-OP. BANK LTD., VISAKHAPATNAM 4 GROUND NO.5: WITHOUT PREJUDICE TO THE ABOVE, THE LE ARNED CIT(A) OUGHT TO HAVE HELD THAT THE PRICE OF ` 7,83,52,408/- PAID, BEING EXCESS OF LIABILITIES OVER THE ASSETS TAKEN OVER IS THE CONSI DERATION PAID FOR ACQUISITION OF A COMMERCIAL / BUSINESS RIGHT WHICH IS DEPRECIABLE IN TERMS OF SECTION 32(1)(II) AND CONSEQUENTLY OUGHT TO HAVE DIRECTED THE ASSESSING OFFICER TO ALLOW THE DEPRECIATION ON THIS AMOUNT. GROUND NO.6: THE LEARNED CIT(A) IS NOT JUSTIFIED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER, IN DISALLOWING THE AMORTI ZATION OF PREMIUM ON GOVERNMENT SECURITIES, AMOUNTING TO ` 11,06,494/-. 3. THE FIRST GROUND OF APPEAL RAISED BY THE ASSESSE E IS GENERAL IN NATURE. THUS, NO ADJUDICATION IS REQUIRED, THEREFO RE, THE SAME IS DISMISSED. 4. GROUND NO.2 RELATING TO PROVISION FOR STAFF GRAT UITY. IN THE ASSESSMENT ORDER, THE A.O. HAS OBSERVED THAT FROM T HE PROFIT & LOSS ACCOUNT, IT IS SEEN THAT THE ASSESSEE HAS CLAIMED A N AMOUNT OF ` 20 LAKHS AS A PROVISION FOR STAFF GRATUITY. THIS AMOU NT IS DEBITED TO PROFIT & LOSS ACCOUNT BUT THE SAME IS ACCUMULATED UNDER THE HEAD RESERVE FOR GRATUITY FUND WHICH SHOWS THAT THE ACTUAL PAYMENT WAS NOT MADE BY THE ASSESSEE. THEREFORE, THE A.O. HAS DISALLOWED T HE CLAIM OF THE ASSESSEE. ON APPEAL, THE LD. CIT(A) BY FOLLOWING T HE CASE OF DISTRICT COOPERATIVE CENTRAL BANK, ELURU, AFTER CONSIDERING THE DETAILS FILED BY THE ASSESSEE, HE GAVE A CATEGORICAL FINDING THAT PAYMEN T MADE BY THE ASSESSEE TOWARDS UNPROVED GRATUITY FUND IS NOT AN A LLOWABLE EXPENDITURE. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED BEFORE US ITA NOS.444, 445, 449 & 450/VIZAG/2012;COO 5&6/VIZA G/2013; ITA 726/VIZAG/2013; ITA 2&38/VIZAG/2014 VISAKHAPATNAM CO-OP. BANK LTD., VISAKHAPATNAM 5 THAT EVEN PROVISION IS MADE FOR THE STAFF GRATUITY IT IS AN ALLOWABLE EXPENDITURE. WE FIND THAT THERE IS NO MERIT IN THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE FOR THE REASON THAT SIMPLY MAKING A PROVISION WILL NOT LEADS TO ALLOWABLE EXPENDITURE, UNLESS PAY MENT IS MADE. THUS, THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS DIS MISSED. 5. THE THIRD GROUND OF APPEAL RELATING TO PROVISION FOR STANDARD ASSETS. THE ASSESSEE HAS CLAIMED AN AMOUNT OF ` 30,87,213/- AS A PROVISION FOR STANDARD ASSETS BY DEBITING THE SAME IN THE PROFIT & LOSS ACCOUNT. HOWEVER, THIS AMOUNT IS SHOWN IN THE BALA NCE SHEET UNDER THE HEAD PROVISION ON PERFORMING ASSETS. IN THE ASSE SSMENT ORDER, THE A.O. HAS OBSERVED THAT NO ACTUAL EXPENDITURE WAS IN CURRED BY THE ASSESSEE AND ONLY A PROVISION WHICH IS IN THE NATUR E OF CONTINGENT LIABILITY WAS MADE ON STANDARD ASSETS ONLY WITH A P RESUMPTION THAT THE SAME MAY BECOME NON-PERFORMING ASSET AT A FUTURE DA TE. THUS, A.O. DISALLOWED BY OBSERVING THAT THE NATURE OF CONTINGE NT LIABILITY DO NOT CONSTITUTE AN EXPENDITURE. ASSESSEE CARRIED MATTER IN APPEAL BEFORE THE CIT(A). THE LD. CIT(A) CONFIRMED THE ORDER OF THE A.O. BY OBSERVING THAT THE ASSESSEE IS PROVIDED ONLY PROVISION FOR S TANDARD ASSETS, BUT IT IS NOT THE CASE OF THE ASSESSEE THAT ANY OF THESE ASSE TS HAVE BECOME BAD OR NON-RECOVERABLE. IT IS ALSO NOT THE CASE THAT A NY OF THESE ITA NOS.444, 445, 449 & 450/VIZAG/2012;COO 5&6/VIZA G/2013; ITA 726/VIZAG/2013; ITA 2&38/VIZAG/2014 VISAKHAPATNAM CO-OP. BANK LTD., VISAKHAPATNAM 6 LOANS/ASSETS ARE WRITTEN OFF AND THE PROVISION CLAI MED BY THE ASSESSEE IS NOT ALLOWABLE DEDUCTION AS PER THE OF THE INCOME TA X ACT, 1961 (HEREINAFTER CALLED AS 'THE ACT'). BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE CLAIM OF THE ASSESS EE HAS TO BE ALLOWED. WE FIND NO MERIT IN THE ARGUMENT OF THE L D. COUNSEL FOR THE ASSESSEE FOR THE SIMPLE REASON THAT THE ASSESSEE HA S MADE A PROVISION FOR STANDARD ASSETS NOT ON THE NON-PERFORMING ASSET S. IT IS A MERE PROVISION. WE FIND NO REASON TO INTERFERE WITH THE ORDER PASSED BY THE LD. CIT(A). THIS GROUND OF APPEAL RAISED BY THE AS SESSEE IS DISMISSED. 6. NEXT GROUND OF APPEAL RELATING TO LOSS ON ACCOUN T OF BOBBILI BRANCH MERGER. DURING THE COURSE OF THE ASSESSMENT PROCEE DINGS, THE A.O. HAS OBSERVED THAT DURING THE YEAR UNDER CONSIDERATION, BOBBILI COOPERATIVE URBAN BANK WAS MERGED WITH THE ASSESSEE BANK AND TH E ASSESSEE CLAIMED ` 1,56,70,500/- AS AMORTIZATION AMOUNT ON ACCOUNT OF THE SAID MERGER IN THE PROFIT & LOSS ACCOUNT. THIS CLAIM WA S DISALLOWED BY THE A.O. ON THE GROUND THAT THE CLAIM OF THE ASSESSEE N OT IN ACCORDANCE WITH PROVISIONS OF SECTION 72AB OR SECTION 44DB OF THE ACT. BEFORE CIT(A), IT WAS SUBMITTED THAT THE CLAIM OF THE MERG ER OF BOBBILI BANK WITH THE ASSESSEE BANK TOOK PLACE AS PER THE APPROV AL OF RBI. THE MERGER WAS ALSO APPROVED BY THE REGISTRAR OF COOPER ATIVE SOCIETIES. ON ITA NOS.444, 445, 449 & 450/VIZAG/2012;COO 5&6/VIZA G/2013; ITA 726/VIZAG/2013; ITA 2&38/VIZAG/2014 VISAKHAPATNAM CO-OP. BANK LTD., VISAKHAPATNAM 7 6.11.2007, THE RBI POLICIES DID NOT PROMOTE FRESH B RANCH LICENSES AS SUCH, THE BANKS EXPANSION WAS NOT POSSIBLE. THE ON LY OPTION AVAILABLE FOR EXPANSION WAS TO ACQUIRE OTHER URBAN BANKS WHIC H WERE NOT PERFORMING WELL. THEREFORE, THE PROPOSAL FOR THE M ERGER OF BOBBILI BANK WITH THE ASSESSEE BANK WAS MADE AND WAS ACCEPTED BY RBI. ACCORDINGLY, THE MERGER WAS EFFECTED IN NOVEMBER, 2 007 AS PER THE FINANCIAL POSITION OF BOBBILI BANK AS ON 14.11.2007 . THERE WERE ACCUMULATED LOSSES TO THE EXTENT OF ` 7,83,52,408/-. THERE WAS NO CONSIDERATION PAID FOR ACQUISITION OF THE BOBBILI B ANK. THIS LOSS IS AMORTIZED BY THE BOBBILI BANK FOR A PERIOD OF 5 YEA RS AS PER THE RBI GUIDELINES. THEREFORE, THE ASSESSEE CLAIMED A DEDU CTION OF ` 1,56,70,500/- BEING 1/5 TH OF THE ACCUMULATED LOSSES. THE SAME MAY BE ALLOWED. BEFORE THE CIT(A), THE LD. COUNSEL FOR TH E ASSESSEE ALSO RELIED ON THIS RBI LETTER DATED 22.10.2007. THE ASSESSEE ALSO ARGUED BEFORE THE LD. CIT(A) THAT THE MERGER GAVE A NEW AVENUE OF BUSINESS TO THE ASSESSEE BANK. THE EXCESS OF LIABILITIES OVER ASSE TS OF BOBBILI BANK SHOULD BE BEYOND THE PAYMENT MADE FOR EXPANSION OF ITS BUSINESS. SINCE THE EXPENDITURE WAS INCURRED BY THE ASSESSEE IN THE REGULAR COURSE OF BUSINESS TOWARDS PROMOTION AND EXPANSION OF ITS BUSINESS, THE SAME SHOULD BE ALLOWED AS A BUSINESS EXPENDITURE. IT WAS ALSO ARGUED ITA NOS.444, 445, 449 & 450/VIZAG/2012;COO 5&6/VIZA G/2013; ITA 726/VIZAG/2013; ITA 2&38/VIZAG/2014 VISAKHAPATNAM CO-OP. BANK LTD., VISAKHAPATNAM 8 ALTERNATIVELY BEFORE THE LD. CIT(A) THAT THE PRICE PAID (COST OF EXCESS OF LIABILITIES OVER THE ASSETS) IS SIMILAR THAT OF THE GOODWILL. THE SAME SHOULD BE TREATED AS A GOODWILL WHICH IS AN INTANGI BLE ASSET AS PER THE ACT. DEPRECIATION AS APPLICABLE TO INTANGIBLE ASSE T SHOULD BE GIVEN TO ASSESSEE IN THE CASE OF AMORTIZATION OF LOSS IS NOT ALLOWED. THE LD. CIT(A) HAS CONSIDERED THE DETAILED SUBMISSIONS MADE BY THE ASSESSEE AND HE HAS OBSERVED THAT THE ALLOWANCE OF BROUGHT F ORWARD LOSSES OR UNABSORBED DEPRECIATION ARE COVERED BY PROVISIONS O F IT ACT NOT BY RBI GUIDELINES. AS PER SUB-SECTION 7 OF SECTION 72AB O F THE ACT THE ACCUMULATED LOSSES WOULD HAVE BEEN ENTITLED TO CARR Y FORWARD AND SET OFF UNDER THE PROVISIONS OF SECTION 72 OF THE ACT. SIMILAR IN THE CASE OF THE UNABSORBED DEPRECIATION AND LAW SHOULD BE ALLOW ABLE IN THE HANDS OF THE BOBBILI BRANCH AS PER THE PROVISIONS OF THE ACT. THE BOBBILI BANK HAD NEVER FILED RETURN OF INCOME. THUS, ITS LOSS I S NOT ELIGIBLE FOR CARRY FORWARD UNDER THE PROVISIONS OF SECTION 72 OF THE A CT AND CONFIRMED THE ORDER OF THE A.O. 7. ON BEING AGGRIEVED, ASSESSEE CARRIED MATTER IN A PPEAL BEFORE THE TRIBUNAL. 8. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED T HAT THE BOBBILI COOPERATIVE URBAN BANK WAS MERGED WITH THE ASSESSEE BANK AND AS PER ITA NOS.444, 445, 449 & 450/VIZAG/2012;COO 5&6/VIZA G/2013; ITA 726/VIZAG/2013; ITA 2&38/VIZAG/2014 VISAKHAPATNAM CO-OP. BANK LTD., VISAKHAPATNAM 9 THE FINANCIAL POSITION OF THE BOBBILI BANK AS ON 14 .11.2007, THERE WERE ACCUMULATED LOSSES OF ` 7,83,53,408/-. THERE WAS NO CONSIDERATION PAID FOR THE ACQUISITION OF BOBBILI BANK. THIS LOSS IS AMORTIZED BY THE ASSESSEE BANK OVER A PERIOD OF 5 YEARS AS PER THE R BI GUIDELINES. THEREFORE, THE CLAIM OF THE ASSESSEE HAS TO BE ALLO WED. HE HAS ALTERNATIVELY ARGUED THAT THE PRICE PAID BY THE ASS ESSEE I.E. COST OF EXCESS OF LIABILITIES OVER THE ASSETS IS SIMILAR TH AT OF THE GOODWILL AND HENCE THE SAME SHOULD BE TREATED AS A GOODWILL, WHI CH IS AN INTANGIBLE ASSET AS PER THE INCOME TAX ACT AND DEPRECIATION MA Y BE ALLOWED. FOR THAT HE RELIED ON THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF COSMOS COOPERATIVE BANK LIMITED VS. DCIT IT A NOS.460&461/PUNE/2012 FOR THE ASSESSMENT YEARS 2007 -08 & 2008-09 DATED 23.1.2014. 9. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE FIRST ARGUMENT RAISED BY THE ASSESSEE IN RESPECT OF CLAIM MADE BY THE ASSESSEE OF ` 1,56,70,500/- AS AMORTIZED LOSS ON ACCOUNT OF THE MERGER OF BOBBILI BRANCH WITH THE ASSESSEE. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE A.O. HAS ASKED THE ASSESSEE WHAT I S THE BASIS FOR THE CLAIM. BEFORE THE A.O., THE ASSESSEE IS NOT ABLE T O JUSTIFY IN RESPECT OF ITA NOS.444, 445, 449 & 450/VIZAG/2012;COO 5&6/VIZA G/2013; ITA 726/VIZAG/2013; ITA 2&38/VIZAG/2014 VISAKHAPATNAM CO-OP. BANK LTD., VISAKHAPATNAM 10 CLAIM MADE BY THE COMPANY AS PER THE PROVISIONS OF SECTION 44DB & 72AB OF THE ACT. THE A.O. HAS DISALLOWED THE SAME AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. ON APPEAL, IT WA S SUBMITTED BEFORE THE LD. CIT(A) THAT THE MERGER OF BOBBILI BANK WITH THE ASSESSEE BANK IS AS PER THE GUIDELINES ISSUED BY THE RBI, THEREFORE, THIS LOSS HAS TO BE ALLOWED. THE LD. CIT(A) BY CONSIDERING THE RBI GUI DELINES, HE HAS OBSERVED THAT THE INCOME TAX ACT HAS A SPECIFIC PRO VISION EMBEDDED FOR COMPUTING THE DEDUCTIONS IN THE CASE OF BUSINESS RE -ORGANISATION OF COOPERATIVE BANKS. SECTION 44DB OF THE ACT DEALS W ITH THE DETAILS OF SUCH COMPUTATION IN THE CASE OF DEDUCTION UNDER SEC TIONS 32, 35D, 35DD OR 35DDA OF THE ACT. SIMILARLY, SECTION 72AB DEALS WITH THE CARRY FORWARD AND SET OFF OF ACCUMULATED LOSSES AND DEPRE CIATION IN THE CASE OF BUSINESS RE-ORGANIZATION OF THE COOPERATIVE BANK S. HE HAS OBSERVED THAT AS PER SUB-SECTION 7 OF SECTION 72AB OF THE AC T, THE ACCUMULATED LOSSES WOULD HAVE BEEN ENTITLED TO CARRY FORWARD AN D SET OFF UNDER THE PROVISIONS OF SECTION 72 OF THE ACT, SIMILAR IS THE CASE WITH UNABSORBED DEPRECIATION. THEREFORE, THE MAIN CONDITION WHICH NEEDS TO BE FULFILLED IS THAT THE SAID LOSS SHOULD HAVE BEEN ALLOWABLE IN THE HAND OF BOBBILI BRANCH AS PER THE PROVISIONS OF THE ACT. THE BOBBI LI BANK NEVER FILED ITS RETURN OF INCOME, THUS, ITS LOSS IS NOT OTHERWISE E LIGIBLE TO BE CARRY ITA NOS.444, 445, 449 & 450/VIZAG/2012;COO 5&6/VIZA G/2013; ITA 726/VIZAG/2013; ITA 2&38/VIZAG/2014 VISAKHAPATNAM CO-OP. BANK LTD., VISAKHAPATNAM 11 FORWARD UNDER THE PROVISIONS OF SECTION 72 OF THE A CT AND HE CONFIRMED THE ORDER PASSED BY THE A.O. WE FIND THAT THE BOBB ILI COOPERATIVE BANK HAS NOT FILED ANY RETURN OF INCOME. THE ASSESSEE A LSO NOT BROUGHT ANYTHING ON RECORD TO SHOW THAT THE BOBBILI BANK HA S FILED THE RETURN OF INCOME. ONCE THE BOBBILI BANK WHICH IS MERGED WITH ASSESSEES BANK NOT FILED ANY RETURN OF INCOME, AS PER THE PROVISIO NS OF SECTION 72AB OF THE ACT, THE BOBBILI BANK IS NOT ELIGIBLE TO CARRY FORWARD ANY LOSSES OR UNABSORBED DEPRECIATION. THE SAME CANNOT BE ALLOWE D IN THE HANDS OF THE ASSESSEES CASE. THE LD. CIT(A) CORRECTLY BY C ONSIDERING THE PROVISIONS OF THE ACT DISALLOWED THE CLAIM MADE BY THE ASSESSEE. SO FAR AS RBI GUIDELINES WITH REGARD TO THE AMORTIZATION O F LOSSES IS CONCERNED, IN VIEW OF THE SPECIFIC PROVISION PROVIDED BY SECTI ON 72AB OF THE ACT, IN OUR OPINION, RBI GUIDELINES CANNOT PREVAIL OVER THE INCOME TAX ACT. WE FURTHER OBSERVED THAT BUSINESS LOSSES AND UNABSORBE D DEPRECIATION OF AMALGAMATING CO-OPERATIVE BANK I.E. BOBBILI CO-OPER ATIVE BANK CAN BE SET OFF AGAINST THE INCOME OF SUCCESSOR CO-OPERATIV E BANK I.E. AMALGAMATED CO-OPERATIVE BANK (ASSESSEE) IF THE AMA LGAMATION IS WITHIN THE MEANING OF SECTION 72AB OF THE ACT. IN THE PRESENT CASE, THE AMALGAMATING COMPANY I.E. BOBBILI CO-OPERATIVE BANK NOT FILED RETURN OF INCOME AS REQUIRED U/S 72AB OF THE ACT. THEREFORE, THE CLAIM OF THE ITA NOS.444, 445, 449 & 450/VIZAG/2012;COO 5&6/VIZA G/2013; ITA 726/VIZAG/2013; ITA 2&38/VIZAG/2014 VISAKHAPATNAM CO-OP. BANK LTD., VISAKHAPATNAM 12 ASSESSEE CANNOT BE ALLOWED. WE FIND THAT THE LD. C IT(A) HAS CORRECTLY DECIDED THE ISSUE AND DISALLOWED THE CLAIM OF THE A SSESSEE. 10. SO FAR AS ALTERNATIVE GROUND RAISED BY THE ASSE SSEE IS CONCERNED, ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE, THE EXCESS OF LIABILITIES OVER THE ASSETS OF BOBBILI BANK SHOULD BE TREATED A S THE PRICE PAID FOR ACQUISITION OF A COMMERCIAL/BUSINESS ASSET WHICH IS A DEPRECIABLE ASSET AND IT HAS TO BE TREATED AS A GOODWILL. WE FIND THE RE IS NO MERIT IN THE ARGUMENT OF LD. COUNSEL FOR THE ASSESSEE. GOODWILL MEANS IT IS AN INTANGIBLE ASSET THAT ARISES AS A RESULT OF ACQUISI TION OF ONE COMPANY BY ANOTHER FOR A PREMIUM VALUE. IN THIS CASE, THE ASS ESSEE HAS NOT PAID ANY AMOUNT TO AMALGAMATING COMPANY. THE ASSESSEE H AS ONLY TAKEN LOSSES OF AMALGAMATING COMPANY I.E. BOBBILI CO-OPER ATIVE BANK. THEREFORE, THE ASSESSEE HAS NOT ACQUIRED ANY GOODWI LL. THE LD. CIT(A) BY CONSIDERING THE ENTIRE FACTS OF THE CASE HAS PAS SED A DETAILED ORDER BY CONSIDERING THE PROVISIONS OF LAW. IN SO FAR AS CASE LAWS RELIED UPON BY THE LD. COUNSEL FOR THE ASSESSEE PARTICULARLY IN THE CASE OF COSMOS CO-OPERATIVE BANK LIMITED (SUPRA) IS ENTIRELY DIFFE RENT FACTS AND CIRCUMSTANCES, THEREFORE, WE FIND NO APPLICATION TO THE FACTS OF THE PRESENT CASE. IN SO FAR AS OTHER CASE LAWS RELIED BY THE LD. COUNSEL FOR THE ASSESSEE ALSO DECIDED IN A DIFFERENT FACTS AND CIRCUMSTANCES AND ITA NOS.444, 445, 449 & 450/VIZAG/2012;COO 5&6/VIZA G/2013; ITA 726/VIZAG/2013; ITA 2&38/VIZAG/2014 VISAKHAPATNAM CO-OP. BANK LTD., VISAKHAPATNAM 13 THEREFORE, WE FIND NO APPLICATION TO THE FACTS OF T HE PRESENT CASE. WE FIND NO REASON TO INTERFERE WITH THE ORDER PASSED B Y THE LD. CIT(A). THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS DIS MISSED. 11. SO FAR AS GROUND NO.6 IS CONCERNED, IT IS RELAT ING TO AMORTIZATION OF PREMIUM ON GOVERNMENT SECURITIES. IN THE ASSESSMEN T ORDER, THE A.O. HAS OBSERVED THAT THE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE. IT IS ONLY A PROVISION I.E. CONTINGENT LIABILITY WAS MADE WHICH MAY BECOME PAYABLE AT FUTURE DATE, THEREFORE, THE PROVISIONS A RE NOT ALLOWABLE U/S 36 & 37 OF THE ACT, THE SAME IS DISALLOWED. ON APPEAL , THE LD. CIT(A) CONFIRMED THE ORDER OF THE A.O. ON APPEAL, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THIS IS AN ASCERTAINED LIABILITY UNDER THE PROVISION AND THE AMOUNT IS ALREADY PAID. WE FIND T HIS NEEDS VERIFICATION, THEREFORE, WE SET ASIDE THE ORDER PAS SED BY THE CIT(A) AND REMIT THE MATTER BACK TO THE A.O. TO EXAMINE AFRESH AND DECIDE IN ACCORDANCE WITH LAW. THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NOS.444, 445, 449 & 450/VIZAG/2012;COO 5&6/VIZA G/2013; ITA 726/VIZAG/2013; ITA 2&38/VIZAG/2014 VISAKHAPATNAM CO-OP. BANK LTD., VISAKHAPATNAM 14 13. THE CROSS OBJECTION FILED BY THE ASSESSEE VIDE CO NO.5/VIZAG/2013 IS ONLY SUPPORTIVE AND THE SAME IS DISMISSED. ITA 449/VIZAG/2012 (REVENUES APPEAL FOR AY 2008-09 ) 14. THE ONLY GROUND RAISED BY THE REVENUE IN THIS A PPEAL IN RESPECT OF INTEREST PAYMENT BY THE SOCIETY TO ITS MEMBERS ON T HE SHARE CAPITAL. THE GROUNDS RAISED BY THE REVENUE ARE EXTRACTED BEL OW: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), VISAKHAPATNAM IS ERRONEOUS IN LAW AND ON THE FACTS OF THE CASE 2. THE LEARNED CIT(A), VISAKHAPATNAM HAS ERRED IN H OLDING THAT THE INTEREST PAYMENT BY THE SOCIETY TO ITS MEMBERS ON T HE SHARE CAPITAL COMPONENT DOES NOT PARTAKE THE CHARACTER OF DIVIDEN D AND, HENCE, PERMITTED TO BE TREATED AS DEDUCTIBLE EXPENDITURE U NDER THE PROVISIONS OF THE INCOME TAX ACT. 3. THE LEARNED CIT(A) OUGHT TO HAVE UPHELD THE ACTI ON OF THE ASSESSING OFFICER IN HOLDING THAT THE INTEREST ON S HARE CAPITAL IS NOTHING BUT APPROPRIATION OF PROFITS AND IS NOT AN EXPENDIT URE INCURRED FOR CARRYING ON THE BUSINESS. 4. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME O F HEARING. 15. IN THE ASSESSMENT ORDER, THE A.O. HAS OBSERVED THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF ` 1,57,53,620/- TOWARDS INTEREST ON SHARE CAPITAL AND THE AMOUNT PAID BY THE ASSESSEE TO THE MEMBERS OF THE BANK. AS PER THE PROVISIONS OF THE A.P. MUTUALLY A IDED COOPERATIVE SOCIETIES ACT, 1995, THE ASSESSEE HAS TO ALLOCATE I NTEREST ON SHARE CAPITAL ONLY UPON DETERMINATION OF THE SURPLUS ARIS ING FROM THE BUSINESS ITA NOS.444, 445, 449 & 450/VIZAG/2012;COO 5&6/VIZA G/2013; ITA 726/VIZAG/2013; ITA 2&38/VIZAG/2014 VISAKHAPATNAM CO-OP. BANK LTD., VISAKHAPATNAM 15 I.E. NET PROFIT. THIS IS NOTHING BUT APPROPRIATION OF PROFITS BUT NOT THE EXPENDITURE INCURRED FOR CARRYING ON THE BUSINESS A ND ACCORDINGLY, HE HAS DISALLOWED AND SAME IS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. ASSESSEE CARRIED MATTER IN APPEAL BEFOR E THE CIT(A). IT WAS SUBMITTED BEFORE THE LD. CIT(A) THAT THE ISSUE INVO LVED IN THIS APPEAL IS COVERED BY THE COORDINATE BENCH OF THE TRIBUNAL, IN THE ASSESSEES OWN CASE IN THE ASSESSMENT YEAR 2007-08 AND THEREFORE, THE SAME MAY BE FOLLOWED. 16. THE LD. CIT(A) AFTER CONSIDERING THE EXPLANATIO N OF THE ASSESSEE, HE HAS DIRECTED THE A.O. TO DELETE THE ADDITION BY OBSERVING AS UNDER: 5. GROUND NO.2: INTEREST ON SHARE CAPITAL (RS.1,57 ,53,620/-): ASSESSEE DEBITED AN AMOUNT OF RS.1,57,53,620/- TOWA RDS INTEREST ON SHARE CAPITAL. THIS INTEREST REPRESENTS THE INTERES T PAID TO MEMBERS OF THE BANK. ASSESSEE, RELYING ON SECTION 16(1) OF A.P. MU TUALLY AIDED CO- OPERATIVE SOCIETIES ACT 1995, CLAIMED THAT THE INTE REST PAID ON SHARE CAPITAL IS A CHARGE AGAINST THE PROFITS. AD, AFTER CONSIDERING THE EXPLANATION OFFERED BY THE ASSESSEE, HELD THAT THE INTEREST ON SHARE CAPITAL IS NOTHING BUT APPROPRIATION OF PROFITS AND IS NOT AN EXPENDITURE INCURRED FOR CARRYING ON THE BUSINESS AND DISALLOWE D THE CLAIM. DURING THE APPELLATE PROCEEDINGS IT IS POINTED OUT ON BEHALF O F THE ASSESSEE THAT SIMILAR DISALLOWANCE WAS MADE IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2007-08. ON APPEAL, CIT(A) UPHELD THE VIEW OF THE AO THAT THE SAID PAYMENT IS ONLY AN APPROPRIATION OF PROFITS AND NOT A CHARGE OF PROFIT. MATTER WENT TO HON'BLE TRIBUNAL WHICH, VIDE ITS ORD ER DTD.29.08.2011 IN ITA NO.5&19/V/2011, HELD THAT THE INTEREST ON SHARE CAPITAL GOES TO REDUCE THE GROSS INTEREST COLLECTED BY IT FROM ITS MEMBERS AND WOULD NOT FORM PART OF PROFITS AT ALL. THE RELEVANT PORTION O F THE HON'BLE TRIBUNAL'S DECISION IS REPRODUCED HEREUNDER: ITA NOS.444, 445, 449 & 450/VIZAG/2012;COO 5&6/VIZA G/2013; ITA 726/VIZAG/2013; ITA 2&38/VIZAG/2014 VISAKHAPATNAM CO-OP. BANK LTD., VISAKHAPATNAM 16 AS STATED EARLIER, IT WAS HELD IN THOSE CASES THAT THE INCOME TAX IS TO BE LEVIED ON THE REAL INCOME I.E. THE PROFIT ARR IVED AT ON COMMERCIAL PRINCIPLES SUBJECT TO THE PROVISIONS OF THE INCOME-TAX ACT. ACCORDINGLY IT WAS HELD THAT THE REBATE GIVEN TO THE MEMBERS IS NOT A PART OF PROFIT AT ALL. IN THE INSTANT CASE ALSO, IT HAS TO BE HELD THAT THE AMOUNT PAID BY THE ASSESSEE AS 'INTER EST ON SHARE CAPITAL',' IN THE INSTANT YEAR, GOES TO REDUCE THE GROSS INTEREST COLLECTED BY IT FROM ITS MEMBERS AND IT WOULD NOT F ORM PART OF PROFIT AT ALL. WE ORDER ACCORDINGLY. AS THE FACTS OF THE CASE ARE SAME, RESPECTFULLY FOL LOWING THE HON'BLE JURISDICTIONAL TRIBUNAL'S DECISION IN THE ASSESSEE' S OWN CASE, I HOLD THAT THE INTEREST ON SHARE CAPITAL WOULD NOT FORM PART OF TH E PROFIT AT ALL AND HENCE I DIRECT AD TO DELETE THE ADDITION MADE. 17. ON BEING AGGRIEVED, REVENUE CARRIED MATTER IN A PPEAL BEFORE THE TRIBUNAL. 18. THE LD. D.R. HAS SUBMITTED THAT THE ASSESSEE BA NK HAS TO ALLOCATE THE INTEREST ON SHARE CAPITAL ONLY UPON DETERMINATI ON OF THE SURPLUS ARISING FROM THE BUSINESS I.E. NET PROFIT. THIS IS NOTHING BUT APPROPRIATION OF PROFITS NOT EXPENDITURE INCURRED F OR CARRYING ON THE BUSINESS. 19. THE LD. D.R. HAS POINTED OUT THAT THE COORDINAT E BENCH OF THE TRIBUNAL, IN THE ASSESSEES OWN CASE FAILED TO APPR ECIATE THE ISSUE PROPERLY AND THEREFORE HELD THAT INTEREST PAID TO T HE MEMBERS OF THE SOCIETY IS AN ALLOWABLE EXPENDITURE WHICH IS CONTRA RY TO LAW. 20. IT IS FURTHER SUBMITTED THAT A DEDUCTION HAS TO BE ALLOWED AS PER THE PROVISIONS OF THE ACT. INCOME TAX ACT DOES NOT PERMIT INTEREST ITA NOS.444, 445, 449 & 450/VIZAG/2012;COO 5&6/VIZA G/2013; ITA 726/VIZAG/2013; ITA 2&38/VIZAG/2014 VISAKHAPATNAM CO-OP. BANK LTD., VISAKHAPATNAM 17 PAYMENT TO THE MEMBERS AS AN ALLOWABLE EXPENDITURE. IN FACT IT IS NOT AN EXPENDITURE AT ALL INCURRED BY THE ASSESSEE, IT IS ONLY AN APPROPRIATION OF PROFITS. HE HAS SUBMITTED THAT THE ORDER PASSED BY THE COORDINATE BENCH OF THE TRIBUNAL DOES NOT CONSTITUTE ANY PRECE DENT, THEREFORE, SAME MAY NOT BE FOLLOWED AND THE ORDER OF THE A.O. MAY BE UPHELD. 21. THE LD. A.R. STRONGLY SUPPORTED THE ORDER PASSE D BY THE CIT(A) AS WELL AS ORDER OF THE ITAT IN ASSESEES OWN CASE FOR A.Y. 2007-08. 22. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. IN THIS CASE, THE ASSESSEE HAS DEBITED AN AMOUNT OF ` 1,57,53,620/- TOWARDS INTEREST ON SHARE CAPITAL. IT WAS SUBMITTED THAT A S PER THE SECTION 16 OF THE A.P. MUTUALLY AIDED COOPERATIVE SOCIETIES ACT, 1995, IT IS AN ALLOWABLE EXPENDITURE. THE A.O. HAS NOT ACCEPTED T HE EXPLANATION OF THE ASSESSEE AND HE HAS OBSERVED THAT THE ASSESSEE HAS TO ALLOCATE THE INTEREST ON SHARE CAPITAL ONLY UPON DETERMINATION O F THE SURPLUS ARISING FROM THE BUSINESS I.E. NET PROFIT. THIS IS NOTHING BUT APPROPRIATION OF PROFITS BUT NOT AN EXPENDITURE INCURRED FOR CARRYIN G ON THE BUSINESS. THE LD. CIT(A) BY FOLLOWING THE DECISION OF THE COO RDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2007-08 IN ITA NO.5/VIZAG/2011 & 19/VIZAG/2011 FOR A.Y. 2007-08 VI DE ORDER DATED ITA NOS.444, 445, 449 & 450/VIZAG/2012;COO 5&6/VIZA G/2013; ITA 726/VIZAG/2013; ITA 2&38/VIZAG/2014 VISAKHAPATNAM CO-OP. BANK LTD., VISAKHAPATNAM 18 29.8.2011 HAS DIRECTED THE A.O. TO DELETE THE ADDIT ION MADE BY HIM. IT IS SUBMITTED ACROSS THE BAR THAT THE VERY SAME ISSU E IN THE ASSESSEES OWN CASE IS PENDING BEFORE THE HONBLE HIGH COURT. IN VIEW OF THE ABOVE, BY FOLLOWING THE COORDINATE BENCH OF THE TRI BUNAL, IN VIEW OF THE DOCTRINE OF PRECEDENT, WE DISMISS THIS GROUND OF AP PEAL RAISED BY THE DEPARTMENT. 23. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ITA NO.445/VIZAG/2013 (ASSESSEES APPEAL FOR A.Y. 2009-10): ITA NO.450/VIZAG/2012 (REVENUES APPEAL FOR A.Y. 20 09-10): & CO 6/VIZAG/2013 (ASSESEES APPEAL FOR A.Y. 2009-1 0): 24. THE FIRST GROUND OF APPEAL RAISED BY THE ASSESS EE IS GENERAL IN NATURE AND THE SAME IS DISMISSED. 25. THE SECOND GROUND OF APPEAL RAISED IN THIS APPE AL IS RELATING TO THE PROVISION FOR STANDARD ASSETS WHICH IS SIMILAR TO T HAT OF ASSESSMENT YEAR 2008-09. IN VIEW OF OUR DECISION ABOVE FOR THE ASS ESSMENT YEAR 2008-09, THIS GROUND OF APPEAL RAISED BY THE ASSESS EE IS DISMISSED. 26. IN RESPECT OF THIRD GROUND OF APPEAL, THE LD. C OUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT IN THE ASSESSMENT ORDER , THE A.O. ALREADY DISALLOWED THE SAME CLAIM MADE BY THE ASSESSEE AND SUBMITTED THAT IT IS AMOUNTING TO A DOUBLE DISALLOWANCE. WE FIND THAT TH E LD. CIT(A) HAS ITA NOS.444, 445, 449 & 450/VIZAG/2012;COO 5&6/VIZA G/2013; ITA 726/VIZAG/2013; ITA 2&38/VIZAG/2014 VISAKHAPATNAM CO-OP. BANK LTD., VISAKHAPATNAM 19 NOT CONSIDERED THIS ASPECT, THEREFORE, WE SET ASIDE THE ORDER PASSED BY THE LD. CIT(A) AND REMIT THE MATTER BACK TO THE A.O . TO CONSIDER THE ISSUE AND PASS AN ORDER IN ACCORDANCE WITH LAW. 27. GROUND NO.4 IS RELATING TO PROVISION FOR STAFF GRATUITY. IN THE ASSESSMENT ORDER, THE A.O. HAS OBSERVED THAT THE AS SESSEE HAS CLAIMED ` 60 LAKHS AS A PROVISION FOR STAFF GRATUITY DEBITED THE SAME IN THE PROFIT & LOSS ACCOUNT. THE A.O. HAS ASKED THE ASSESSEE TO FURNISH THE DETAILS. THE A.O. AFTER CONSIDERING THE DETAILS SUBMITTED BY THE ASSESSEE, HE HAS OBSERVED THAT AS PER THE INFORMATION AVAILABLE ON R ECORD, IT IS NOT CLEAR WHETHER THE ASSESSEE IS CONTRIBUTING TO THE RECOGNI SED GRATUITY FUND OR NOT, ACCORDINGLY, THE CLAIM OF THE ASSESSEE OF ` 60 LAKHS WAS DISALLOWED. ON APPEAL, THE CIT(A) BY FOLLOWING THE ASSESSEES O WN CASE FOR 2008-09, THE ORDER OF THE A.O. IS CONFIRMED AND DIRECTED THE A.O. TO ALLOW THE DEDUCTION OF THE ACTUAL AMOUNT OF GRATUITY PAID DUR ING THE YEAR. WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CI T(A) AND THE SAME IS DISMISSED. 28. GROUND NO.5 IS AMORTIZATION OF PREMIUM ON GOVER NMENT SECURITIES. THE SAME ISSUE HAS BEEN REMITTED BACK TO THE A.O. F OR THE ASSESSMENT YEAR 2008-09 AND THEREFORE, THE ORDER OF THE CIT(A) IS SET ASIDE AND DIRECTED THE A.O. TO DECIDE IN ACCORDANCE WITH LAW AS PER THE DIRECTIONS ITA NOS.444, 445, 449 & 450/VIZAG/2012;COO 5&6/VIZA G/2013; ITA 726/VIZAG/2013; ITA 2&38/VIZAG/2014 VISAKHAPATNAM CO-OP. BANK LTD., VISAKHAPATNAM 20 GIVEN IN ASSESSMENT YEAR 2008-09. THIS GROUND OF A PPEAL RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 29. GROUND NO.6 IS LOSS ON ACCOUNT OF MERGER. IT I S SIMILAR TO THE GROUND NO.4 OF THE ASSESSMENT YEAR 2008-09. IN VIE W OF OUR ORDER IN ITA NO.444/VIZAG/2012 FOR THE ASSESSMENT YEAR 2008- 09, THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS DISMISSED. 30. GROUND NO.7 IS SIMILAR TO THAT OF GROUND NO.5 F OR THE ASSESSMENT YEAR 2008-09. IN VIEW OF OUR DECISION ABOVE, THE S AME IS DISMISSED. 31. IN VIEW OF THE ABOVE, THE APPEAL FILED BY THE A SSESSEE IN ITA NO.445/VIZAG/2012 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 32. SO FAR AS REVENUE APPEAL IN ITA NO.450VIZAG/201 2 IS CONCERNED, THE GROUND OF APPEAL RAISED BY THE REVENUE IS SIMIL AR TO THE GROUND RAISED FOR THE ASSESSMENT YEAR 2008-09 IN ITA NO.44 9/VIZAG/2012. IN VIEW OF OUR DECISION ABOVE, THIS GROUND OF APPEAL R AISED BY THE REVENUE IS DISMISSED. 33. THE CROSS OBJECTION FILED BY THE ASSESSEE IS S UPPORTIVE AND THE SAME IS DISMISSED. ITA NOS.444, 445, 449 & 450/VIZAG/2012;COO 5&6/VIZA G/2013; ITA 726/VIZAG/2013; ITA 2&38/VIZAG/2014 VISAKHAPATNAM CO-OP. BANK LTD., VISAKHAPATNAM 21 ITA NO.726/VIZAG/2013 (ASSESSEES APPEAL FOR A.Y. 2010-11): ITA NO.2/VIZAG/2014 (REVENUES APPEAL FOR A.Y. 2010 -11): & ITA NO.38/VIZAG/2014 (REVENUES APPEAL FOR A.Y. 2 010-11): 34. THE FIRST GROUND OF APPEAL RAISED BY THE ASSESS EE IS GENERAL IN NATURE AND NO ADJUDICATION IS REQUIRED. THEREFORE, SAME IS DISMISSED. 35. SO FAR AS SECOND GROUND OF APPEAL RAISED BY THE ASSESSEE IS CONCERNED IS REGARDING DISALLOWANCE OF ` 5,64,79,087/- U/S 40(A)(IA) OF THE ACT. IN THE ASSESSMENT ORDER, THE A.O. HAS OBS ERVED THAT ASSESSEE BEING A COOPERATIVE SOCIETY ENGAGED IN THE BANKING BUSINESS IS UNDER OBLIGATION TO DEDUCT THE TDS ON THE INTEREST PAYMEN T EXCEEDING ` 10,000/-, IN VIEW OF THE SPECIFIC PROVISION CONTAIN ED IN SECTION 194A(3)(I)(B) OF THE ACT AND AS ASSESSEE FAILED TO DEDUCT THE TDS, THE A.O. HAS DISALLOWED THE CLAIM OF THE ASSESSEE. ON APPEAL, CIT(A) CONFIRMED THE SAME. SUBSEQUENTLY, WHEN THE ASSESSE E FILED A RECTIFICATION PETITION U/S 154 OF THE ACT DATED 4.1 2.2013, THE LD. CIT(A) HAS CORRECTED THE ORDER BY CONSIDERING THE ASSESSME NT YEAR 2007-08 AND RELIEF WAS GRANTED. THEREFORE, WE FIND THAT TH IS GROUND OF APPEAL RAISED BY THE ASSESSEE HAS NO MERIT AND THE SAME IS DISMISSED. 36. THE THIRD GROUND OF APPEAL OF THE ASSESSEE FOR THE A.Y. 2010-11 RELATING TO PROVISION OF STANDARD ASSETS. THE ISSU E INVOLVED IN THIS ITA NOS.444, 445, 449 & 450/VIZAG/2012;COO 5&6/VIZA G/2013; ITA 726/VIZAG/2013; ITA 2&38/VIZAG/2014 VISAKHAPATNAM CO-OP. BANK LTD., VISAKHAPATNAM 22 APPEAL IS SIMILAR TO THAT OF GROUND NO.3 RAISED IN THE ASSESSMENT YEAR 2008-09 BY THE ASSESSEES APPEAL. IN VIEW OF OUR D ECISION ABOVE, THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS DISMISSE D. 37. THE FOURTH GROUND OF APPEAL RAISED BY THE ASSES SEE RELATING TO PROVISION FOR GRATUITY, WHICH IS SIMILAR TO THE SEC OND GROUND OF APPEAL RAISED FOR THE ASSESSMENT YEAR 2008-09. IN VIEW OF OUR DECISION FOR THE ASSESSMENT YEAR 2008-09, WE FIND THERE IS NO MERIT IN THIS GROUND. THE SAME IS DISMISSED. 38. GROUND NO.5 OF THE APPEAL RELATING TO AMORTIZAT ION OF PREMIUM ON GOVERNMENT SECURITIES, WHICH IS SIMILAR TO THE GROU ND NO.6 RAISED IN THE ASSESSMENT YEAR 2008-09. IN VIEW OF OUR DECISION F OR THE A.Y. 2008-09, THE ORDER PASSED BY THE CIT(A) IS SET ASIDE, DIRECT ED THE A.O. TO DECIDE THE ISSUE AS PER THE ABOVE DIRECTIONS GIVEN FOR A.Y . 2008-09. THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 39. SO FAR AS GROUND NO.6 RAISED BY THE ASSESSEE IN THIS APPEAL IS SIMILAR TO THE GROUND NO.5 RAISED BY THE ASSESSEE F OR THE A.Y. 2008-09. IN VIEW OF OUR DECISION FOR THE ASSESSMENT YEAR 200 8-09, THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS DISMISSED. ITA NOS.444, 445, 449 & 450/VIZAG/2012;COO 5&6/VIZA G/2013; ITA 726/VIZAG/2013; ITA 2&38/VIZAG/2014 VISAKHAPATNAM CO-OP. BANK LTD., VISAKHAPATNAM 23 40. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN ITA NO.726/VIZAG/2013 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 41. IN SO FAR AS REVENUES APPEAL VIDE ITA NO.2/VIZ AG/2014 FOR THE A.Y. 2010-11 IS CONCERNED, THE ONLY ISSUE RAISED IS PAYMENT OF INTEREST ON SHARE CAPITAL WHETHER IT IS AN EXPENDITURE OR AP PROPRIATION OF PROFITS. THIS ISSUE HAS ALREADY BEEN CONSIDERED IN THE REVEN UES APPEAL FOR THE A.Y. 2008-09 IN ITA NO.449/VIZAG/2012. IN VIEW OF OUR DECISION ABOVE, THIS GROUND OF APPEAL RAISED BY THE REVENUE IS DISM ISSED. 42. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IN ITA NO.2/VIZAG/2014 IS DISMISSED. 43. IN SO FAR AS ANOTHER APPEAL FILED BY THE REVENU E FOR THE SAME ASSESSMENT YEAR I.E. 2010-11 VIDE ITA NO.38/VIZAG/2 014 IS CONCERNED, THE FACTS ARE IN BRIEF THAT THE ASSESSEE HAS PAID I NTEREST TO VARIOUS DEPOSITORS AND NO TDS WAS DEDUCTED. THE A.O. OF TH E OPINION THAT ASSESSEE BEING A COOPERATIVE SOCIETY ENGAGED IN THE BANKING BUSINESS IS UNDER OBLIGATION TO DEDUCT THE TDS ON INTEREST PAYM ENT EXCEEDING ` 10,000/- IN VIEW OF THE SPECIFIC PROVISION U/S 194A (3)(I)(B) OF THE ACT AND THE ASSESSEE HAS FAILED TO DEDUCT TDS. THEREFO RE, THE A.O. HAS DISALLOWED THE CLAIM OF THE ASSESSEE. THE LD. CIT( A) INITIALLY CONFIRMED ITA NOS.444, 445, 449 & 450/VIZAG/2012;COO 5&6/VIZA G/2013; ITA 726/VIZAG/2013; ITA 2&38/VIZAG/2014 VISAKHAPATNAM CO-OP. BANK LTD., VISAKHAPATNAM 24 THE ORDER OF THE A.O. SUBSEQUENTLY, THE ASSESSEE H AS FILED A RECTIFICATION U/S 154 OF THE ACT DATED 14.12.2013 AND SUBMITTED T HAT THE VERY SAME ISSUE HAS BEEN CONSIDERED BY THE CIT(A) AS WELL AS ITAT FOR EARLIER YEARS AND DECIDED IN FAVOUR OF THE ASSESSEE. THE L D. CIT(A) HAS CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND DIRE CTED THE A.O. TO DELETE THE ADDITION BY OBSERVING AS UNDER: 5.2 I HAVE CONSIDERED THE SUBMISSIONS. THE ISSUE CON SIDERED IN THE ABOVE APPELLATE ORDER WAS WHETHER THE ASSESSEE, A COOPERA TIVE BANK IS REQUIRED TO EFFECT TDS ON PAYMENT OF INTEREST MADE TO ITS MEMBERS, WHE N THE AMOUNTS EXCEED RS.10,000/-. A VIEW WAS TAKEN THAT IN THE ABOVE ORD ER DTD.22.10.2013 THAT IF THE INTEREST AMOUNT EXCEEDS RS.10,000/- THEN THE APPELL ANT IS REQUIRED TO DEDUCT TDS EVEN IF THE PAYMENT WAS MADE TO THE MEMBERS. SUCH A VIEW WAS TAKEN WITH REFERENCE TO PROVISION CONTAINED IN SECTION 194A(3) (I)(B) AND IT WAS HELD THAT SECTION 194A(3)(I)(B) WOULD PREVAIL OVER SECTION 194A(3)(V) OF THE ACT. SUCH A VIEW WAS TAKEN WITHOUT CONSIDERING THE CLARIFICATION GIVEN I N THE CBDT CIRCULAR NO.9 OF 2002 DTD.11.09.2002. THE RELEVANT CLARIFICATION IN THE C IRCULAR READS AS UNDER: UNDER SECTION 194A OF THE INCOME-TAX ACT, 1961, TAX IS DEDUCTIBLE AT SOURCE FROM ANY PAYMENT OF INCOME BY WAY OF INTERES T OTHER THAN INCOME BY WAY OF INTEREST ON SECURITIES. CLAUSE(V) OF SUB- SECTION (3) OF SECTION 194A EXEMPTS SUCH INCOME CREDITED OR PAID BY A COOP ERATIVE SOCIETY TO A MEMBER THEREOF FROM THE REQUIREMENT OF TDS. ON THE OTHER HAND, CLAUSE (VIIA) OF SUB-SECTION(3) OF SECTION 194A EXEMPTS FR OM THE REQUIREMENT OF TDS SUCH INCOME CREDITED OR PAID IN RESPECT OF DEPO SITS (OTHER THAN TIME- DEPOSITS MADE ON OR AFTER 1 ST JULY, 1995) WITH A COOPERATIVE SOCIETY ENGAGED IN CARRYING ON THE BUSINESS OF BANKING. REPRESENTATIONS HAVE BEEN RECEIVED IN THE BOARD SEE KING CLARIFICATION AS TO WHETHER A MEMBER OF A COOPERATIVE BANK MAY RECEI VE WITHOUT TDS INTEREST ON TIME DEPOSIT MADE WITH THE COOPERATIVE BANK ON OR AFTER 1 ST JULY, 1995. THE BOARD HAS CONSIDERED THE MATTER AND IT IS CLARIFIED THAT A MEMBER OF A COOPERATIVE BANK SHALL RECEIVE INTEREST ON BOTH TIME DEPOSITS AND DEPOSITS OTHER THAN TIME DEPOSITS WITH SUCH COO PERATIVE BANK WITHOUT TDS UNDER SECTION 194A BY VIRTUE OF THE EXEMPTION G RANTED VIDE CLAUSE (V) OF SUB-SECTION (3) OF THE SAID SECTION. THE PROVISIONS OF CLAUSE (VILA) OF THE SAID SUB-SECTION ARE APPLICABLE ONLY IN CASE OF A NON-MEMBER DEPOSITOR OF THE COOPERATIVE BANK, WHO SHALL RECEIV E INTEREST ONLY ON DEPOSITS OTHER THAN TIME DEPOSITS MADE ON OR AFTER 1ST JULY, 1995 WITHOUT TDS UNDER SECTION 194A. (EMPHASIS UNDERLINED) ITA NOS.444, 445, 449 & 450/VIZAG/2012;COO 5&6/VIZA G/2013; ITA 726/VIZAG/2013; ITA 2&38/VIZAG/2014 VISAKHAPATNAM CO-OP. BANK LTD., VISAKHAPATNAM 25 THUS THE CIRCULAR CLARIFIES THAT PROVISIONS OF SECT ION 194A(3)(V) WOULD PREVAIL. 5.3 IN VIEW OF THE CLARIFICATION GIVEN IN THE CIRCUL AR THE VIEW TAKEN IN THE APPELLATE ORDER DTD.22.10.2013 SUFFERS FROM MISTAKE AND, AS S UCH A VIEW WAS TAKEN WITHOUT CONSIDERATION OF THE ABOVE REFERRED CBDT CIRCULAR C LARIFYING THE POSITION OF LAW, IT WOULD AMOUNT TO MISTAKE APPARENT FROM RECORD AND RE CTIFIABLE U/S.154 OF THE I.T. ACT. FURTHER, IT IS NOTED THAT THE ASSESSEE HA D RELIED ON THE CBDT CIRCULAR NO.9/2002 DTD.11.09.2002 AND THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF JALGAON DISTRICT CENTRAL CO-OPERATIVE BANK, IN ITS APPEAL FOR A.Y.2007-08, WHICH HAS BEEN DISCUSSED AND CONSIDERED BY THE LEARNED CI T(A) WHILE DECIDING THE ASSESSEE'S APPEAL FOR A.Y.2007-08. THE RELEVANT EXT RACT OF THE CIT(A) ORDER HAS BEEN REFERRED AND DISCUSSED IN THE HON'BLE ITAT'S O RDER FOR A.Y.2007-08, (COPY OF WHICH SUBMITTED AS PART OF PAPER-BOOK IN THE ORI GINAL APPEAL). THEREFORE, IT CANNOT BE SAID THAT THIS ASPECT WAS NOT CONSIDERED BY THE HON'BLE ITAT WHILE PASSING ORDER IN THE ASSESSEE'S APPEAL FOR A.Y.2007 -08. 5.4 IN VIEW OF THE ABOVE DISCUSSION, I AM CONVINCED THAT THE APPELLATE ORDER DTD.22.10.2013 SUFFERS FROM MISTAKE APPARENT FROM R ECORD AND THE MISTAKE IS RECTIFIED BY SUBSTITUTING THE FOLLOWING OPERATIVE P ARA IN THE PLACE OF THE PARA 6.3, 6.4 & 6.5 OF THE APPELLATE ORDER DTD.22.10.201 3. 6.3 I HAVE CONSIDERED THE SUBMISSIONS MADE. IN VIEW OF THE CLARIFICATION GIVEN IN THE CBDT CIRCULAR NO.9/2002, IT IS HELD THAT THE ASSESSEE IS NOT REQUIRED TO EFFECT TDS ON THE INTER EST PAYMENT MADE TO ITS MEMBERS EVEN IF IT EXCEEDS RS.10,000/-. THE IMPUGNED DISALLOWANCE MADE IN THE ASSESSMENT IS NOT IN ACCOR DANCE WITH THE CLARIFICATION GIVEN IN THE CBDT CIRCULAR NO.9/2002 AND ACCORDINGLY THE AO IS DIRECTED TO DELETE THE IMPUGNED DISALLOWANCE MADE OF RS.5,64,79,087/-. THIS GROUND OF APPEAL IS ALLOWED IN FAVOUR OF THE APPELLANT. 5.5 THE APPELLATE ORDER DTD.22.10.2013 IN ITA NO.02 97/12-13 BE CONSIDERED TO BE MODIFIED AND RECTIFIED ACCORDINGLY WITH REFERENC E TO GROUND NO.3 OF THE APPEAL. 44. THE LD. CIT(A) BY FOLLOWING HIS OWN DECISION FO R THE ASSESSMENT YEAR 2007-08 AND ALSO ORDER OF THE TRIBUNAL FOR THE VERY SAME YEAR IN THE RECTIFICATION ORDER HE HAS DELETED THE ADDITION MADE BY THE A.O. WE FIND NO REASON TO INTERFERE WITH THE ORDER PASSED B Y THE LD. CIT(A). THIS APPEAL RAISED BY THE REVENUE IS DISMISSED. ITA NOS.444, 445, 449 & 450/VIZAG/2012;COO 5&6/VIZA G/2013; ITA 726/VIZAG/2013; ITA 2&38/VIZAG/2014 VISAKHAPATNAM CO-OP. BANK LTD., VISAKHAPATNAM 26 45. IN THE RESULT, THE APPEALS FILED BY THE ASSESSE E IN ITA NOS.444 & 445/VIZAG/2013 AND 726/VIZAG/2013 FOR THE ASSESSMEN T YEARS 2008-09, 2009-10 & 2010-11 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES, CROSS OBJECTIONS FILED BY THE ASSESSEE VIDE CO NOS.5&6/VI ZAG/2013 FOR THE ASSESSMENT YEARS 2008-09 & 2009-10 ARE DISMISSED AND THE APPEALS FILED BY THE REVENUE VIDE ITA NOS.449 & 450/VIZAG/2 012 FOR THE ASSESSMENT YEARS 2008-09 & 2009-10 AND IN ITA NOS.2 & 38/VIZAG/2014 FOR THE ASSESSMENT YEAR 2010-11 ARE DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 30 TH SEPT16. SD/- SD/- ( . ) ( . ) (G. MANJUNATHA) (V. DURGA RAO) /ACCOUNTANT MEMBER /JUDICIAL MEMBER ! /VISAKHAPATNAM: % /DATED : 30.09.2016 VG/SPS '! (! /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE VISAKHAPATNAM CO-OPERATIVE B ANK LTD., NEAR TOWN KOTHA ROAD, MAIN ROAD, VISAKHAPATNAM. 2. / THE APPELLANT THE ACIT, CIRCLE-1(1), VISAKHAPA TNAM 3. / THE RESPONDENT THE ADDL. CIT, RANGE-1, VISAKHA PATNAM 4. / THE RESPONDENT THE JCIT, RANGE-1, VISAKHAPATNA M 5 ) / THE CIT-1, VISAKHAPATNAM 6. ) ( ) / THE CIT(A), VISAKHAPATNAM 7. ! , , , , ! / DR, ITAT, VISAKHAPATNAM 8 . / GUARD FILE / BY ORDER // TRUE COPY //
