Deputy Commissioner of Income-tax, V. Pune District Central Co.op. Bank Ltd., Pune

ITA 481/PUN/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7489 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 16-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIRUPAMA KOTRA
• Keywords: Depreciation; Business expenditure; Principle of natural justice
• Section: 234B; 6; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUNE . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO . 1979 /P U N/201 4 / ASSESSMENT YEAR : 20 1 0 - 11 PUNE DISTRICT CENTRAL CO. OPERATIVE BANK LTD., 4B, B.J. ROAD, SADHU VASWANI CHOWK, PUNE 411001 PAN : AAAAP7372D ....... / APPELLANT / V/S. DY. COMMISSIONER OF INCOME TAX, CIRCLE 1(2), PUNE / RESPONDENT . / ITA NO . 1980/PUN/2014 / ASSESSMENT YEAR : 2011 - 12 PUNE DISTRICT CENTRAL CO. OPERATIVE BANK LTD., 4B, B.J. ROAD, SADHU VASWANI CHOWK, PUNE 411001 PAN : AAAAP7372D ....... / APPELLANT / V/S. ADDL. COMMISSIONER OF INCOME TAX, RANGE 1, PUNE / RESPONDENT 2 ITA NO S. 1979 & 1980/PUN/2014 AND 481 & 482/PUN/2015 . / ITA NO S. 481 & 482/PUN/2015 / ASSESSMENT YEAR S : 2010 - 11 & 2011 - 12 DY. COMMISSIONER OF INCOME TAX, CIRCLE 7, PUNE ....... / APPELLANT / V/S. PUNE DISTRICT CENTRAL CO. OPERATIVE BANK LTD., 4B, B.J. ROAD, SADHU VASWANI CHOWK, PUNE 411001 PAN : AAAAP7372D / RESPONDENT ASSESSEE BY : S HRI M.K. KULKARNI REVENUE BY : S MT. NIRUPAMA KOTRA / DATE OF HEARING : 21 - 08 - 2017 / DATE OF PRONOUNCEMENT : 31 - 0 8 - 2017 / ORDER PER VIKAS AWASTHY, JM : TH ESE CROSS APPEALS BY THE ASSESSEE AND THE DEPARTMENT ARE DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - I, PUNE FOR THE ASSESSMENT YEAR S 2010 - 11 AND 2011 - 12 . THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) FOR ASSESSMENT YEAR 2010 - 11 IS DATED 31 - 07 - 2014 AND THE IMPUGNED ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) FOR ASSESSMENT YEAR 2011 - 12 IS DATED 28 - 08 - 2014. SINCE, THE ISSUES RAISED IN ALL THE AP PEALS ARE EMANATING FROM SAME SET OF FACTS, THESE 3 ITA NO S. 1979 & 1980/PUN/2014 AND 481 & 482/PUN/2015 APPEALS ARE TAKEN UP TOGETHER FOR ADJUDICATION AND ARE DECIDED BY THIS COMMON ORDER. 2. FOR THE SAKE OF CONVENIENCE IN DECIDING THE APPEALS , FIRST THE APPEALS OF THE ASSESSEE AND DEPARTMENT FOR ASSESSMENT YEAR 2010 - 11 ARE TAKEN UP FOR ADJUDICATION. ITA NO. 1979/PUN/2014 & ITA NO. 481/PUN/2015 (A.Y. 2010 - 11) 3. SHRI M.K. KULKARNI APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED AT THE OUTSET THAT HE IS NOT PRESSING GROUND NO. 4 RAISED IN THE APPEAL BY THE ASSESSEE IN ASSESSMENT YEAR 2010 - 11. THE REMAINING GROUNDS BEFORE THE TRIBUNAL FOR ADJUDICATION ARE AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE A.O OF RS . 1,94,73,302/ - CLAIMED AS AMORTIZATION OF PREMIUM EXPENDITURE FOR HTM SECURITIES BY PAYMENT OF PREMIUM OVER AND ABOVE THE FACE VALUE OF SUCH SECURITIES. FURTHER THE JURISDICTIONAL BOMBAY HIGH COURT HAS HELD THAT SUCH EXPENDITURE OF PREMIUM PAID ON ACQUISITI ON OF HTM SECURITIES IS AN ALLOWABLE DEDUCTION IT. IT BE HELD ACCORDINGLY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT (A) WAS NOT CORRECT IN HIS DECISION TO DISALLOW SUCH AMORTIZATION EXPENDITURE HOLDING THAT THERE WAS NO PROVISION IN THE INCOME TAX ACT 1961, TO ALLOW AMORTIZATION PREMIUM AS DEDUCTION EITHER IN THE YEAR OF ACQUISITION OF HTM SECURITIES OR OVER THE PERIOD OF MATURITY ON DEFERRED BASIS. THIS ALSO RUNS TO COUNTER TO CL. (VII) OF INSTRUCTION NO. 17/2008 DATED 2 6.11.2008 OF CBDT. THE DEDUCTION CLAIMED BE ALLOWED. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT (A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION MADE BY THE A.O. OF RS.33,09,500/ - HOL DING IT AS PROVISION FOR AMORTIZATION OF PREMIUM ON GOVERNMENT SECURITIES, WHICH IN FACT THE CLAIM AS BASED ON THE RBI CIRCULAR DATED 06.10.2000 AND CBDT INSTRUCTION NO . 17/2008 DATED 26.11.2008. IT BE ALLOWED TO THE APPELLANT - BANK. 4 ITA NO S. 1979 & 1980/PUN/2014 AND 481 & 482/PUN/2015 4. NOT PRESSED.* 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT (A) WAS NOT JUSTIFIED IN NOT CONSIDERING THE ALTERNATIVE CONTENTION PLACED BEFORE HIM AND WITH A VIEW TO AVOID DOUBLE ADDITIONS OUGHT TO HAVE ALLOWED THE RELIEF OF RS .4,15,00,000/ - AS SAME WAS A LSO PART OF ADDITION MADE IN A. Y. 2009 - 10. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEVY OF INTEREST U/S 234B AND 234C IS NOT JUSTIFIED. T HE INTEREST LEVIED BE DELETED. 7. THE APPELLANT CRAVES THE PERMISSION TO ADD, AMEND , MODIFY, ALTER, REVISE, SUBSTITUTE, DELETE ANY OR ALL GROUNDS OF APPEAL, IF DEEMED NECESSARY AT THE TIME OF HEARING OF THE APPEAL. 4 . THE REVENUE IN ITS APPEAL FOR ASSESSMENT YEAR 2010 - 11 HAS RAISED ONLY ONE GROUND WHICH READS AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.38,00,00,000/ - MADE BY AO ON ACCOUNT OF NON - OVERDUE INTEREST ON PERFORMING ASSETS ON ACCRUAL BASIS AS AGAINST RECOGNITION OF SAID INTEREST INCOME BY THE APPELLANT ON REALIZATION B ASIS. 5 . THE LD. AR OF ASSESSEE SUBMITTED THAT THE ASSESSEE IS A CO - OPERATIVE SOCIETY AND IS ENGAGED IN BANKING BUSINESS. THE GROUND NOS. 1 AND 2 RAISED IN THE APPEAL BY THE ASSESSEE RELATE TO DISALLOWANCE OF ASSESSEES CLAIM FOR AMORTIZATION OF PREM IUM EXPENDITURE FOR HTM SECURITIES. THE LD. AR CONTENDED THAT THE ISSUE RAISED IN GROUND NOS. 1 AND 2 OF THE PRESENT APPEAL IS IDENTICAL TO THE GROUND NO. 1 RAISED IN THE APPEAL BY THE ASSESSEE BEFORE THE TRIBUNAL IN ITA NO. 1796/PUN/2013 FOR ASSESSMENT Y EAR 2009 - 10. THE TRIBUNAL BY FOLLOWING THE ORDER IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2008 - 09 IN ITA NO. 1975/PUN/2013 DECIDED THE ISSUE IN 5 ITA NO S. 1979 & 1980/PUN/2014 AND 481 & 482/PUN/2015 FAVOUR OF THE ASSESSEE BY HOLDING AMORTIZATION OF PREMIUM EXPENDITURE AS AN ALLOWABLE BUSINESS EXPENDITURE. 5.1 THE LD. AR CONTENDED THAT IN GROUND NO. 3 THE ASSESSEE HAS ASSAILED DISALLOWANCE OF PROVISION FOR AMORTIZATION OF PREMIUM ON GOVERNMENT SECURITIES. SIMILAR DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER IN ASSESSMENT YEAR 2009 - 10. THE ASSESSEE CARR IED THE MATTER IN APPEAL BEFORE THE TRIBUNAL IN ITA NO. 1796/PUN/2013 (SUPRA). HOWEVER, IN ASSESSMENT YEAR 2009 - 10 IN THE BOOKS OF ACCOUNT THE PROVISION WAS WRONGLY MENTIONED AS PROVISION FOR INVESTMENT DEPRECIATION FUND INSTEAD OF PROVISION FOR DEPRECIAT ED VALUE OF INVESTMENT. THE TRIBUNAL REMITTED THE MATTER BACK TO THE FILE OF ASSESSING OFFICER FOR VERIFICATION AND RE - ADJUDICATION . THE LD. AR SUBMITTED THAT IN THE ASSESSMENT YEAR UNDER APPEAL SINCE THE ISSUE IS SAME THE MATTER CAN BE REMITTED BACK TO ASSESSING OFFICER FOR VERIFICATION WITH SIMILAR DIRECTIONS . THE LD. AR SUBMITTED THAT IN FACT THE CLAIM OF ASSESSEE IS BASED ON RBI CIRCULAR DATED 06 - 10 - 2012 AND CBDT INSTRUCTION NO. 17/2008 DATED 26 - 11 - 2008. 5.2 IN RESPECT OF GROUND NO. 5 THE LD. AR AFTER ARGUING FOR SOMETIME FAIRLY ADMITTED THAT COMMISSIONER OF INCOME TAX (APPEALS) HAS GRANTED RELIEF TO ASSESSEE ON AN ALTERNATE CONTENTION THEREBY DELETING ADDITION TO THE TUNE OF RS.38 CRORES. THUS, IN VIEW OF RELIEF GRANTED , THE GROUND NO. 5 HAS BEC OME INFRUCTUOUS AND HENCE, IS NOT PRESSED. 6. ON THE OTHER HAND SMT. NIRUPAMA KOTRA REPRESENTING THE DEPARTMENT VEHEMENTLY SUPPORTED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) ON THE ISSUE S RAISED IN THE APPEAL BY ASSESSEE. HOWEVER, THE LD. D R FAIRLY ADMITTED THAT THE ISSUE RELATING TO AMORTIZATION OF PREMIUM ON 6 ITA NO S. 1979 & 1980/PUN/2014 AND 481 & 482/PUN/2015 HTM SECURITIES HAS BEEN DECIDED BY THE TRIBUNAL IN IMMEDIATELY PRECEDING ASSESSMENT YEAR I.E. ASSESSMENT YEAR 2009 - 10 IN ASSESSEES OWN CASE BY THE TRIBUNAL. THE LD. DR SUBMITTED THAT THE DEPARTMENT IN APPEAL HAS RAISED SINGLE ISSUE AGAINST DELETING OF ADDITION OF RS.38 CRORES ON ACCOUNT OF NON - OVERDUE INTEREST ON PERFORMING ASSET OF AGRICULTURE LOANS. THE LD. DR PRAYED FOR REVERSING THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS ) AND UPHOLDING THE ORDER OF ASSESSING OFFICER ON THE ISSUE. 7. THE LD. AR CONTROVERTING THE SUBMISSIONS RAISED ON BEHALF OF THE DEPARTMENT SUBMITTED THAT IN ASSESSMENT YEAR 2009 - 10 THE ASSESSING OFFICER HAD MADE ADDITION OF THE TOTAL INCOME AMOUNTING TO RS.42.15 CRORES . T HE AMOUNT OF RS.38 CRORES IS PART OF RS.42.15 CRORES. THE TRIBUNAL WHILE ADJUDICATING THE ISSUE IN ASSESSMENT YEAR 2009 - 10 SET ASIDE THE ASSESSMENT ORDER AND REMITTED THE MATTER BACK TO ASSESSING OFFICER TO CONSIDER THE ALLOWABILITY OF SAID EXPENDITURE IN THE HANDS OF ASSESSEE. ACCORDINGLY, THE ISSUE RAISED BY THE DEPARTMENT IN PRESENT APPEAL MAY BE DECIDED BY THE TRIBUNAL IN SAME TERMS. 8. BOTH SIDES HEARD. ORDERS OF AUTHORITIES BELOW AND DECISIONS ON WHICH RELIANCE HAS BEEN PLACE D BY THE LD. AR HAVE BEEN CONSIDERED. THE FIRST ISSUE RAISED IN APPEAL BY THE ASSESSEE IN GROUND NOS. 1 AND 2 IS WITH RESPECT TO AMORTIZATION OF PREMIUM ON HTM SECURITIES. THE ISSUE IS NO MORE RES INTEGRA. THE TRIBUNAL IN ASSESSEES OWN CASE IN IMMEDIAT ELY PRECEDING ASSESSMENT YEAR I.E. ASSESSMENT YEAR 2009 - 10 BY FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. HDFC BANK LTD. REPORTED AS 107 DTR 140 HAS HELD THAT AMORTIZATION OF PREMIUM EXPENDITURE FOR SEC URITIES HELD TO MATURITY IS AN 7 ITA NO S. 1979 & 1980/PUN/2014 AND 481 & 482/PUN/2015 ALLOWABLE BUSINESS EXPENDITURE . THE FINDINGS OF THE TRIBUNAL ON THIS ISSUE IN ASSESSMENT YEAR 2009 - 10 IN ASSESSEES OWN CASE ARE AS UNDER : 11. THE HONBLE BOMBAY HIGH COURT IN CIT VS. HDFC BANK (SUPRA) HELD THAT THE ASSESS EE THEREIN WAS ENTITLED TO DEDUCTION WITH RESPECT TO THE DIMINUTION IN THE VALUE OF INVESTMENTS AND AMORTIZATION OF PREMIUM ON INVESTMENTS HELD TO MATURITY ON THE GROUND OF MANDATE OF THE RBI GUIDELINES. THE ISSUE RAISED IN THE PRESENT APPEAL IS IDENTICAL TO THE ISSUE BEFORE THE PUNE BENCH OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008 - 09 AND HONBLE BOMBAY HIGH COURT IN CIT VS. HDFC BANK (SUPRA). WE HOLD THAT AMORTIZATION OF PREMIUM EXPENDITURE FOR SECURITIES HELD TO MATURITY IN VIEW O F RBI GUIDELINES ARE ALLOWABLE BUSINESS EXPENDITURE IN THE CASE OF ASSESSEE. THE GROUNDS OF APPEAL NO.1 AND 2 RAISED BY THE ASSESSEE ARE THUS, ALLOWED. THE LD. DR HAS NOT PLACED ON RECORD ANY CONTRARY DECISION. THUS, IN VIEW OF SETTLE D LAW, THE GROUND NOS. 1 AND 2 RAISED IN THE APPEAL BY THE ASSESSEE ARE ALLOWED . 9 . IN RESPECT OF GROUND NO. 3 THE LD. AR OF ASSESSEE HAS CONTENDED THAT DISALLOWANCE IN RESPECT OF PROVISION FOR AMORTIZATION OF PREMIUM ON GOVERNMENT SECURITIES WAS MADE IN ASSESSMENT YEAR 2009 - 10. THE ISSUE RAISED IN THE PRESENT APPEAL IS SIMILAR. THE TRIBUNAL IN APPEAL OF THE ASSESSEE IN ITA NO. 1796/PN/2013 (SUPRA) HAS REMITTED THE MATTER BACK TO ASSESSING OFFICER FOR VERIFICATION AS IN THE ASSESSMENT YEAR 2009 - 10 THE ASSESSEE HAD WRON GLY MENTIONED THE EXPENDITURE AS PROVISION FOR DEPRECIATION INVESTMENT FUND INSTEAD OF DEPRECIATED VALUE OF INVESTMENT ON TRANSFER FROM HTM TO AFS SECURITIES. THE LD. DR HAS NOT CONTROVERTED THE CONTENTIONS OF LD. AR. THE RELEVANT EXTRACT OF THE ORDER OF TRIBUNAL ON THIS ISSUE READS AS UNDER : 17. . THE PLEA OF THE ASSESSEE BEFORE US WAS THAT THE SAID AMOUNT WAS BOOKED UNDER THE PROVISION FOR INVESTMENT DEPRECIATION FUND BY MISTAKE AND WAS ACTUALLY THE DEPRECIATED VALUE OF THE INVESTMENTS ON ITS TRANS FER 8 ITA NO S. 1979 & 1980/PUN/2014 AND 481 & 482/PUN/2015 FROM HTM TO AFS SECURITIES. THE PERUSAL OF THE PROFIT & LOSS ACCOUNT ENGLISH VERSION REFLECTS THE ASSESSEE TO HAVE CLAIMED THE EXPENDITURE OF RS.40,30,000/ - ON ACCOUNT OF INVESTMENT DEPRECIATION FUND UNDER SCHEDULE 16 PROVISIONS. IN THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES AND THE REVISED CLAIM MADE BY THE ASSESSEE, WE ARE OF THE VIEW THAT THE FACTS AND ISSUE NEEDS TO BE RELOOKED INTO TO DETERMINE THE NATURE OF ENTRY PASSED BY THE ASSESSEE AND FOLLOWING THE PRINCIPLES OF NATURAL JUSTICE, WE DEEM IT F IT TO RESTORE THIS ISSUE BACK TO THE FILE OF ASSESSING OFFICER, WHO SHALL DECIDE THE ISSUE DE NOVO AFTER CONSIDERING THE REVISED PLEA OF THE ASSESSEE AND THE RELEVANT DOCUMENTS IN THIS REGARD. THE ASSESSING OFFICER SHALL AFFORD REASONABLE OPPORTUNITY OF HE ARING TO THE ASSESSEE. THE GROUND OF APPEAL NO.3 RAISED BY THE ASSESSEE IS THUS, ALLOWED FOR STATISTICAL PURPOSES. THUS, IN ORDER TO MAINTAIN CONSISTENCY, WE ARE OF CONSIDER VIEW THAT THIS ISSUE NEEDS A REVISIT TO THE FILE OF ASSESSING OFFICER TO BE A DJUDICATED DE NOVO, IN ACCORDANCE WITH THE DIRECTIONS OF TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2009 - 10. ACCORDINGLY, GROUND NO. 3 RAISED IN THE APPEAL BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 1 0 . IN RESPECT OF GROUND NO. 4 RAISED IN THE APPEAL BY ASSESSEE, THE LD. AR HAS STATED AT THE BAR THAT HE IS NOT PRESSING THE SAME. THUS, IN VIEW OF STATEMENT MADE BY LD. AR , THE GROUND NO. 4 RAISED IN THE APPEAL BY ASSESSEE IS DISMISSED AS NOT PRESSED. 1 1 . IN GROUND NO. 5 THE ASSESSEE HA D ASSAILED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN NOT CONSIDERING ALTERNATE PRAYER OF ASSESSEE WITH REGARD TO ADDITION OF RS.38 CRORES TO AVOID DOUBLE ADDITION. A PERUSAL OF IMPUGNED ORDER SHOWS THAT THE COMMISSIONER OF INCOME TAX (APPEAL S) HAS GRANTED RELIEF TO THE ASSESSEE IN RESPECT OF ALTERNATE CONTENTIONS RAISED QUA ADDITION OF RS.38 CRORES . IN VIEW OF THE FACT THAT RELIEF HAS BEEN GRANTED BY COMMISSIONER OF INCOME TAX (APPEALS) 9 ITA NO S. 1979 & 1980/PUN/2014 AND 481 & 482/PUN/2015 ON ALTERNATE SUBMISSIONS OF THE ASSESSEE, THE GROUND NO . 5 RAISED IN APPEAL BY THE ASSESSEE HAS BECOME INFRUCTUOUS AND THUS IS DISMISSED AS SUCH. 1 2 . THE REVENUE IN ITS APPEAL HAS RAISED SOLITARY GROUND AGAINST DELETING OF ADDITION OF RS.38 CRORES. THE GROUND RAISED BY THE D EPARTMENT IS CORRESPONDING TO GROUND NO. 5 RAISED IN APPEAL BY THE ASSESSEE. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS GRANTED RELIEF TO THE ASSESSEE BY OBSERVING AS UNDER : 7.4.13 HOWEVER, THE ALTERNATIVE CONTENTION OF THE APPELLANT IS THAT THE AMOUNT ADDED BY THE AO TO ITS TOTAL INCOME FOR THE A.Y. 2009 - 10 AMOUNTING TO RS.42.14 CRORES ON THE SAME GROUND MUST BE CONSIDERED WHILE DISALLOWING RS. 38 CRORES IN THE A.Y. 2010 - 11 TO AVOID DOUBLE TAXATION. THERE IS MERIT IN THE ALTERNATIVE CONTENTION OF THE APPELLANT. IN CASE OF NON - OVER DUE INTEREST ON PAS THE BALANCE IN THE NON - OVERDUE INTEREST RECEIVABLE ACCOUNT HAS COME DOWN FROM RS. 44.08 CR. AS ON 1/4/2009 TO RS. 38.40 CR. AS ON 31/3/2010. FOR READY REFERENCE, A COPY OF THE NON - OVERDUE RECEIVABLE ACCOUNT FOR DIFFERENT YEARS IS ATTACH ED TO THE ORDER AS ANNEXURE 'A'. THE OPENING BALANCE OF RS. 44.08 CR. (ACTUAL AMOUNT RS. 42.14 CR.) WAS ALREADY BROUGHT TO TAX BY THE A O FOR THE A. Y.2009 - 10 WHICH WAS ALSO UPHELD BY THE C!T(A) IN THE APPELLATE ORDER DATED 30/08/2013 AND IT APPEARS THAT TH E APPELLANT PREFERRED FURTHER APPEAL AGAINST THE ORDER OF THE CIT(A) AND THE MATTER IS PENDING BEFORE THE ITAT, PUNE. WHEN THE CLOSING BALANCE IN THE ACCOUNT AS ON 31/3/2010 IS LESS THAN OPENING BALANCE, WHICH WAS ALREADY BROUGHT TO TAX FOR THE A.Y. 2009 - 1 0, THE ADDITION OF RS. 38,00,00,000/ - AGAIN THIS YEAR ON THE SAME GROUND AMOUNTS TO DOUBLE TAXATION AS SUBMITTED BY THE APPELLANT. IN FACT, FOR THE A.Y. 2011 - 12, ON VERIFICATION OF THE RECORD, IT IS NOTICED THAT ONLY THE DIFFERENTIAL AMOUNT IN THE NON - OVERD UE INTEREST RECEIVABLE ACCOUNT VIZ. DIFFERENCE BETWEEN CLOSING BALANCE AMOUNT AND OPENING BALANCE AMOUNT WAS BROUGHT TO TAX BY THE A O AND NOT THE CLOSING BALANCE IN THE ACCOUNT AS ON 31/3/2011. ON PARITY OF REASONING AND SINCE THE OPENING BALANCE WAS ALR EADY BROUGHT TO TAX, ONLY THE DIFFERENTIAL AMOUNT BETWEEN THE OPENING BALANCE AS ON 1/4/2009 AND CLOSING BALANCE AS ON 31/3/2010 SHOULD BE BROUGHT TO TAX AND NOT THE ENTIRE CLOSING BALANCE IN THE ACCOUNT AS ON 31/3/2010. SINCE THE CLOSING BALANCE IN THE S AID ACCOUNT (38.40 CRORES) IS LESS THAN THE OPENING BALANCE (44.08 CRORES), NO 10 ITA NO S. 1979 & 1980/PUN/2014 AND 481 & 482/PUN/2015 ADDITION ON THIS GROUND IS WARRANTED FOR THIS YEAR. THUS, IT IS HELD THAT THOUGH THE A O IS JUSTIFIED IN PRINCIPLE IN TAKING THE VIEW THAT NON - OVERDUE INTEREST ON PERFORMING AGRI CULTURAL LOANS IS TO BE ASSESSED ON ACCRUAL BASIS, THE ADDITION OF RS.38,00,00,000/ - IS NOT WARRANTED AS THE CLOSING BALANCE IN THE NON - OVER INTEREST RECEIVABLE ACCOUNT AS ON' 31/3/2010 IS LESS THAN THE OPENING BALANCE' AS ON 1/4/2009 . ACCORDINGLY THE AD DITION OF RS.38,00,00,000/ - MADE BY THE AO ON THIS GROUND IS DELETED. THIS IS WITHOUT ANY PREJUDICE TO THE FINDING THAT SUCH NON - OVERDUE INTEREST ON PERFORMING AGRICULTURAL LOANS HAS TO BE ASSESSED ON ACCRUAL BASIS. THE LD. DR HAS NOT BEEN ABLE TO CONTROVERT THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE. SINCE, NO INFIRMITY HAS BEEN POINTED IN THE VIEW TAKEN BY COMMISSIONER OF INCOME TAX (APPEALS) , THE SOLITARY GROUND RAISED BY THE DEPARTMENT IN APPEAL IS DISMISSED. 1 3 . IN G ROUND NO. 6 THE ASSESSEE HAS ASSAILED LEVY OF INTEREST U/S. 234 B AND 234C OF THE ACT. THE LEVY OF INTEREST U/S. 234B AND 234C IS CONSEQUENTIAL AND MANDATORY, HENCE, GROUND NO. 6 RAISED IN THE APPEAL BY ASSESSEE IS DISMISSED BEING DEVOID OF ANY MERIT. 1 4 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND APPEAL OF THE DEPARTMENT IS DISMISSED. ITA NO. 19 80 /PUN/2014 & ITA NO. 48 2 /PUN/2015 (A.Y. 201 1 - 12 ) 1 5 . THE ASSESSEE IN APPEAL HAS RAISED FOLLOWING GROUNDS : 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) ERRED IN CONFIRMING THE ADDITION OF RS.14,76,52,103/ - MADE BY A. O. ON ACCOUNT OF NON - OVERDUE INTEREST ON PERFORMING ASSETS ON ACCRUAL BASIS AS AGAINST RECOGNITION OF SAID INTEREST INCOME BY THE APPELLA NT ON REALIZATION AND OR ACTUAL BASIS. THE ADDITION BE QUASHED. 11 ITA NO S. 1979 & 1980/PUN/2014 AND 481 & 482/PUN/2015 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE A.O. OF RS.2,28,59,802/ - CLAIMED AS DEDUCTION OF AMORTIZATION O F PREMIUM EXPENDITURE FOR HTM SECURITIES BY PAYMENT OF PREMIUM OVER AND ABOVE THE FACE VALUE OF SUCH SECURITIES. FURTHER THE JURISDICTIONAL HON'BLE BOMBAY HIGH COURT HAS HELD THAT SUCH EXPENDITURE OF PREMIUM PAID ON ACQUISITION OF HTM SECURITIES IS AN ALLO WABLE DEDUCTION. THE ADDITION BE QUASHED. 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) WAS NOT CORRECT IN HIS DECISION TO DISALLOW SUCH AMORTIZATION EXPENDITURE HOLDING THAT THERE WAS NO PROVISION IN THE INCOME TAX ACT 1 961, TO ALLOW AMORTIZATION PREMIUM AS DEDUCTION EITHER IN THE YEAR OF ACQUISITION OF HTM SECURITIES OR OVER THE PERIOD OF MATURITY ON DEFERRED BASIS. THIS ALSO RUNS TO COUNTER TO CL. (VII) OF INSTRUCTION NO. 17/2008 DATED 26.11.2008 OF CBOT. THE DEDUCTION CLAIMED BE ALLOWED. THE INTEREST LEVIED BE DELETED. 4) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEVY OF INTEREST U/S 234B AND 234C IS NOT JUSTIFIED. 5) THE APPELLANT CRAVES / LEAVES TO ADD, AMEND OR ALTER ANY OF THE ABOVE GROUNDS OF APPEAL. 1 6 . THE DEPARTMENT IN ITS APPEAL HAS ASSAILED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) ON SOLITARY GROUND , THE SAME READS AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.38,28,44,705/ - MADE BY AO ON ACCOUNT OF INTEREST ACCRUED ON NPA ACCOUNTS DURING THE YEAR. 17 . THE LD. AR SUBMITTED THAT GROUND NO. 1 IN APPEAL BY THE ASSESSEE IS AGAINST CONFIRMING OF ADDITION OF RS.14,76,52,103/ - ON ACCOUN T OF NON - OVERDUE INTEREST ON PERFORMING ASSETS. THE ONLY SUBMISSIONS MADE BY LD. 12 ITA NO S. 1979 & 1980/PUN/2014 AND 481 & 482/PUN/2015 AR OF ASSESSEE IS THAT THE EXPENDITURE CLAIMED BY ASSESSEE IS ALLOWABLE IN VIEW OF THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. DEO GIRI NAGARI SAHAKARI BANK LTD. REPORTED AS 379 ITR 24. THE LD. AR SUBMITTED THAT THE ASSESSEE HAD CLAIMED THE EXPENDITURE IN LINE WITH RBI PRUDENTIAL NORMS. THE HONBLE JURISDICTIONAL HIGH COURT IN THE AFORESAID DECISION HAS HELD THAT THE ASSESSEE BEING A CO - OPERATIVE BANK HAS TO FOLLOW RBI DIRECTION . WE FIND THAT THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. DEOGIRI NAGARI SAHAKARI BANK LTD. (SUPRA) IS SUBSEQUENT TO THE ASSESSMENT ORDER. NO SUCH PLEA WAS RAISE D BY ASSESSEE EVEN BEFORE COMMISSIONER OF INCOME TAX (APPEALS). THEREFORE, WE DEEM IT APPROPRIATE TO REMIT THIS GROUND BACK TO THE FILE OF ASSESSING OFFICER FOR DE NOVO ADJUDICATION. THE ASSESSING OFFICER SHALL DECIDE THIS ISSUE AFRESH AFTER ASCERTAINING WHETHER THE RATIO LAID DOWN BY HONBLE BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. DEOGIRI NAGARI SAHAKARI BANK LTD. (SUPRA) APPLY IN THE CASE OF ASSESSEE. ACCORDINGLY, GROUND NO. 1 RAISED IN APPEAL BY ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 18 . IN GROUND NOS. 2 AND 3 OF APPEAL THE ASSESSEE HAS ASSAILED THE DISALLOWANCE OF AMORTIZATION OF PREMIUM EXPENDITURE ON HTM SECURITIES . IDENTICAL ISSUE WAS RAI SED BY ASSESSEE IN ITS APPEAL FOR ASSESSMENT YEAR 2010 - 11 AS GROUND NOS. 1 AND 2. THE DETAILED REASONS GIVEN WHILE ADJUDICATING THE AFORESAID GROUNDS IN APPEAL FOR ASSESSMENT YEAR 2010 - 11 WOULD APPLY MUTATIS MUTANDIS TO GROUND NOS. 2 AND 3 IN ASSESSMENT Y EAR 2011 - 12. ACCORDINGLY, GROUND NOS. 2 AND 3 RAISED IN THE APPEAL BY ASSESSEE ARE ALLOWED. 13 ITA NO S. 1979 & 1980/PUN/2014 AND 481 & 482/PUN/2015 19 . IN GROUND NO. 4 THE ASSESSEE HAS ASSAILED THE LEVY OF INTEREST U/S. 234 B AND 234C OF THE ACT. THE LEVY OF INTEREST U/S. 234B AND 234C IS CONSEQUENTIAL AND M ANDATORY, HENCE, GROUND NO. 4 RAISED IN THE APPEAL BY THE ASSESSEE IS DISMISSED BEING DEVOID OF ANY MERIT. 2 0 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED IN THE AFORESAID TERMS. 2 1 . THE REVENUE IN ITS APPEAL HAS RAISED SOLITARY GROUND AGAINST DELETING OF ADDITION OF RS.38,28,44,705/ - ON ACCOUNT OF INTEREST ACCRUED ON NPA ACCOUNTS. A PERUSAL OF THE IMPUGNED ORDER SHOWS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS DELETED THE ADDITION WITH FOLLOWING OBSERVATION: 6.4.5 THUS, IN MY CONSIDERED OPINION, SINCE THE APPELLANT WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, THE INTEREST INCOME FROM ASSETS INCLUDING NPAS, WHICH WAS ALSO INCLUDED IN INTEREST RECEIVED ATE INITIALLY, HAS TO BE ASSESSED TO TAX ON ACCRUAL BASIS. HOWEVER, IT WO ULD BE JUDICIAL IMPROPRIETY TO IGNORE THE DECISION OF THE ITAT PUNE RENDERED ON IDENTICAL ISSUE WHEN THERE IS NO CONTRARY DECISION OF JURISDICTIONAL HIGH COURT ON THE SAME POINT REPORTED AS ON DATE AND THERE ARE TWO CONFLICTING JUDGMENTS OF DELHI HC AND MA DRAS HC AS NOTED BY THE TRIBUNAL. IN THESE CIRCUMSTANCES, I AM CONSTRAINED TO FOLLOW THE DECISION OF THE ITAT, PUNE IN THE CASE OF THE OMERGA JANTA SAHAKARI BANK LTD. REFERRED ANTE, THOUGH I DO NOT FIND MYSELF IN AGREEMENT WITH THE VIEW TAKEN BY THE HON'BL E BENCH ON THIS ISSUE. SUBJECT TO THESE OBSERVATIONS, THE ADDITION OF RS.38,28,44,705/ - MADE BY THE ASSESSING OFFICER IS DEL ETED. GROUND OF APPEAL NO. 3 STANDS DISPOSED OF ACCORDINGLY. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS DELETED THE ADDITION OF RS.38,28,44,705/ - BY FOLLOWING THE ORDER OF TRIBUNAL. THE CO - ORDINATE BENCH HAS HELD THAT INTEREST INCOME RELATABLE TO NPAS IS NOT TAXABLE ON ACCRUAL BASIS IN THE CASE OF CO - OPERATIVE BANKS. THE HONBLE GUJARAT HIGH 14 ITA NO S. 1979 & 1980/PUN/2014 AND 481 & 482/PUN/2015 COURT IN THE CASE OF PRINCIPAL COM MISSIONER OF INCOME TAX VS. SHRI MAHILA SEWA SAHAKARI BANK LTD. REPORTED AS 395 ITR 324 HAS TAKEN A SIMILAR VIEW. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS FOLLOWED JUDICIAL DISCIPLINE. THE LD. DR HAS NOT BROUGHT TO OUR NOTICE ANY CONTRARY JUDGMENT OF HONBLE HIGH COURT OR THE HONBLE APEX COURT. THUS, WE FIND NO REASON TO TAKE A DIFFERENT VIEW. ACCORDINGLY, SOLITARY GROUND RAISED BY THE REVENUE IN APPEAL IS DISMISSED. 2 2 . IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND THE APPEAL OF D EPARTMENT IS DISMISSED. ORDER PRONOUNCED ON THURSDAY, THE 31 ST DAY OF AUGUST, 2017 . SD/ - SD/ - ( . /D. KARUNAKARA RAO ) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 31 ST AUGUST, 2017 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - I, PUNE 4. / THE CIT - I, PUNE 5. , , , / DR, ITAT, B BENCH, PUNE. 6. / GUARD FILE. / / // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE