Kallapanna Awade Ichalkaranji Sahakari Bank Ltd., Ichalkaranji V. Deputy Commissioner ofIncome-tax,

ITA 504/PUN/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1973 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 01-03-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 13-03-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: HITENDRA NINAWE
• Keywords: Opportunity of being heard; Revised return
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , , !'#'' $ , % & BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO. 504/PN/2014 %' ( ')( / ASSESSMENT YEAR : 2011-12 KALLAPANNA AWADE ICHALKARANJI, JANATA SAH. BANK LTD., WARD NO. 12, H. NO. 1, MAIN ROAD, JANATA BANK BHAVAN ICHALKARANJI PAN : AAAAI0111M ....... / APPELLANT ' / V/S. DY. COMMISSIONER OF INCOME TAX, ICHALKARANJI CIRLCE, ICHALKARANJI / RESPONDENT ASSESSEE BY : SHRI M.K. KULKARNI REVENUE BY : SHRI HITENDRA NINAWE / DATE OF HEARING : 01-03-2016 / DATE OF PRONOUNCEMENT : 02-05-2016 * / ORDER PER VIKAS AWASTHY, JM : THE APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE OR DER OF COMMISSIONER OF INCOME TAX (APPEALS), KOLHAPUR DATED 26-02 -2014 FOR THE ASSESSMENT YEAR 2011-12. 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD S ARE: THE ASSESSEE IS A CO-OPERATIVE SOCIETY ENGAGED IN THE BANKIN G BUSINESS. 2 ITA NO. 504/PN/2014, A.Y. 2011-12 THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMEN T YEAR 2011-12 ON 22-09-2011 DECLARING TOTAL INCOME OF ` 7,76,08,875/-. THEREAFTER, THE ASSESSEE FILED REVISED RETURN OF INCOME DECLARING INCOM E OF ` 7,65,51,581/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY UNDER CASS AND ACCORDINGLY NOTICE U/S. 143(2) WAS ISSUED TO THE ASSESSEE ON 06-08-2012. DURING THE COURSE OF SCRUTINY ASSESSMENT THE ASSESSING OFFICER MADE ADDITIONS/DISALLOWANCES IN THE INCOME R ETURNED BY THE ASSESSEE ON FOLLOWING COUNTS: I. ADDITION ON ACCOUNT OF AMORTIZATION OF PREMIUM ON INVESTMEN T IN GOVT. SECURITIES ` 1,02,15,086/-. II. ADDITION ON ACCOUNT OF UNDER DECLARATION OF BANK GUARANTE E COMMISSION ` 4,47,663/-. III. ADDITION ON ACCOUNT OF UNCLAIMED DIVIDEND ` 3,64,174/-. AGGRIEVED BY THE ASSESSMENT ORDER DATED 12-11-2013, T HE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF I NCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) PARTLY A CCEPTED THE APPEAL OF THE ASSESSEE BY DELETING THE ADDITIONS ON A CCOUNT OF AMORTIZATION OF PREMIUM PAID ON GOVT. SECURITIES. IN RESPEC T OF OTHER TWO ADDITIONS, THE COMMISSIONER OF INCOME TAX (APPEALS) SUST AINED THE FINDINGS OF ASSESSING OFFICER. NOW, THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL ASSAILING THE ORDER OF COMMISSIONER OF IN COME TAX (APPEALS) IN CONFIRMING THE ADDITION IN RESPECT OF UNDER DECLAR ATION OF BANK GUARANTEE COMMISSION AND UNCLAIMED DIVIDEND. 3. SHRI M.K. KULKARNI APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE DURING PERIOD RELEVANT TO THE ASSESS MENT YEAR 2011-12 HAS RECEIVED BANK GUARANTEE COMMISSION. THE CO MMISSION IN 3 ITA NO. 504/PN/2014, A.Y. 2011-12 RESPECT OF UNEXPIRED PERIOD OF GUARANTEE NOT PERTAINING T O THE ASSESSMENT YEAR UNDER APPEAL HAS BEEN SHOWN AS BANK GUARANTEE COMMISSION RECEIVED IN ADVANCE UNDER OTHER LIABILITIES IN THE BALANCE SHEET. IN RESPECT OF UNCLAIMED DIVIDEND THE LD. COUNSEL SUBMITTED THAT THE ASSESSEE HAD PAID TAXES ON ITS NET PROFIT DISCLOSED IN PROFIT AND LOSS ACCOUNT. THE DIVIDEND IS DISTRIBUTED OUT OF NET PROFIT AFTER THE PAYMENT OF TAX. THE AMOUNT LEFT AFTER THE PAY MENT OF DIVIDEND IS APPROPRIATED TO RESERVE FUND AND OTHER FUNDS AND SOM ETIMES IT IS AGAIN DISTRIBUTED TO THE SHAREHOLDERS BY WAY OF DIVIDEND A FTER SEEKING APPROVAL IN THE ANNUAL GENERAL MEETING. THE UNCLAIMED DIVID END IS CARRIED FORWARD FOR THREE SUCCESSIVE YEARS. AFTER THREE YEARS, THE AMOUNT OF UNCLAIMED DIVIDEND IS TRANSFERRED TO RESERVE FUND IN ACCORDANCE WITH THE PROVISIONS OF MAHARASHTRA CO-OPERAT IVE SOCIETYS ACT AND RULES AND BYE-LAWS OF THE BANK. SINCE, THE DIVIDEN D IS PAID OUT OF NET PROFITS AFTER TAX, THE UNCLAIMED DIVIDEND ACCOUNT CANNOT BE TREATED AS INCOME OF THE ASSESSEE. THE LD. COUNSEL SUBM ITTED THAT BOTH THESE ISSUES ARE SQUARELY COVERED BY THE ORDER OF TRIB UNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009-10 IN ITA NO. 22 05/PN/2012 DECIDED ON 30-12-2013. THE LD. AR HAS FURNISHED A COPY O F THE ORDER OF TRIBUNAL IN ITA NO. 2205/PN/2012 (SUPRA). 4. SHRI HITENDRA NINAWE REPRESENTING THE DEPARTMENT VEH EMENTLY SUPPORTED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APP EALS) ON BOTH THE ISSUES. HOWEVER, THE LD. DR FAIRLY ADMITTED THAT THE ISSUES RAISED IN THE PRESENT APPEAL ARE IDENTICAL TO THE ISSUES A DJUDICATED BY THE CO-ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009-10 IN ITA NO. 2205/PN/2012 DECIDE D ON 30-12-2013. 4 ITA NO. 504/PN/2014, A.Y. 2011-12 5. BOTH SIDES HEARD. ORDERS OF THE AUTHORITIES BELOW PER USED. THE ASSESSEE HAS ASSAILED THE FINDINGS OF COMMISSIONER OF INCOM E TAX (APPEALS) BY RAISING THREE GROUNDS : I. CONFIRMING THE ADDITION OF ` 4,47,663/- ON ACCOUNT OF BANK GUARANTEE COMMISSION RECEIVED FOR UNEXPIRED PERIOD. II. CONFIRMING THE ADDITION OF ` 3,64,174/- ON ACCOUNT OF UNCLAIMED DIVIDEND. III. LEVY OF INTEREST U/S. 234A, 234B AND 234C OF THE ACT. 6. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ISSUE RELATING TO BANK GUARANTEE COMMISSION RECEIVED FOR UNEXPIR ED PERIOD HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2009-10. AFTER PERUSAL OF ORDER OF TRIBUNAL IN ITA N O. 2205/PN/2012 DECIDED ON 30-12-2013 WE FIND THAT GROUND NO. 1 RAISED IN THE PRESENT APPEAL IS IDENTICAL TO THE GROUND RA ISED BY THE ASSESSEE IN ITS APPEAL FOR ASSESSMENT YEAR 2009-10. THE TRIBUNAL HAS REMITTED THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER WITH CERTAIN DIRECTIONS. THE RELEVANT EXTRACT OF THE FINDINGS OF THE TR IBUNAL ARE REPRODUCED HERE-IN-BELOW: 11. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND IN THE I NSTANT CASE THE AO BROUGHT TO TAX THE ENTIRE AMOUNT OF GUARANTEE COMMI SSION RECEIVED IN ADVANCE. WE FIND IN APPEAL THE LD.CIT(A) UPHELD THE ACTION OF THE AO ON THE GROUND THAT THE GUARANTEE COMMISSION IS IN THE NATURE OF FEE TAKEN FOR THE PURPOSE OF ISSUE OF GUARANTEE WHICH IS A ON E-TIME CHARGE FOR THE SERVICES PROVIDED BY THE ASSESSEE BANK AND IT IS NO T A LIABILITY WHICH HAS TO BE RETURNED TO THE CUSTOMERS/CLIENTS WHO HAS AVA ILED OF THE GUARANTEE FROM THE BANK. ACCORDING TO HIM, FEE IS NOT RETURNA BLE TO THE CLIENTS AND THE WHOLESUM IS RECEIVED AND ACCRUES TO THE ASSESSE E AT THE TIME OF ISSUANCE OF GUARANTEE ITSELF. 5 ITA NO. 504/PN/2014, A.Y. 2011-12 11.1 IT IS THE CASE OF THE LD. COUNSEL FOR THE ASSE SSEE THAT THE INCOME HAS TO BE RECOGNIZED WITH REFERENCE TO THE YEAR WHE N RIGHT TO RECEIVE THE SAME ACCRUES AND IT WILL BE INCORRECT TO TAX THE EN TIRE RECEIPT DURING THE YEAR IN WHICH IT IS RECEIVED. ACCORDING TO HIM WHAT RELATES TO THE YEAR ALONE SHOULD BE TAKEN INTO CONSIDERATION AND THE AM OUNT RECEIVED IN ADVANCE SHOULD BE SPREAD OVER THE PERIOD OF GUARANT EE. 11.2 WE FIND THE SPECIAL BENCH OF THE TRIBUNAL IN T HE CASE OF BANK OF BAHRAIN AND KUWAIT (SUPRA) AT PARA 25 OF THE ORDER HAS OBSERVED AS UNDER : 25. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE RECORD OF THE CASE. THE FUNDAMENTAL PRINCIPLE OF TAXING THE I NCOME UNDER THE MERCANTILE SYSTEM OF ACCOUNTING IS TIME OF ITS CRUC IAL. IT IS NOT MATERIAL WHETHER THE AMOUNT HAS BEEN RECEIVED AT THE TIME OF ACCRUAL OR NOT. THE INCOME IS SAID TO ACCRUE WHEN THE ASSESSEE ACCRUES THE RIGHT TO RECEIVE THE SAME. THEREFORE, THE BASIC QUESTION T O BE ANSW ERED IS AS TO AT WHAT STAGE THE ASSESSEE ACQUIRED ABSOLUTE RIGHT TO RECEI VE THE INCOME. THE PRINCIPLE HAS BEEN SUCCINCTLY ENUNCIATED BY THE HON BLE SUPREME COURT IN THE CASE OF E.D. SASSOON & CO. LTD. & ORS. (SUPR A), WHEREIN, AFTER CONSIDERING THE OBSERVATIONS OF HONBLE JUSTICE MUK ERJI, J. IN THE CASE OF ROGERS PYATT SHELLAC & CO. VS. SECRETARY OF STATE F OR INDIA (1925) 1 ITC 363 AT P. 371 CONSIDERED THE TERM 'ACCRUES, ARISES AND IS RECEIVED' AND ALSO THE OBSERVATIONS OF LORD JUSTICE FRY QUOTED BY HON'BLE JUSTICE MUKERJI, J. IN COLQUHOUN VS. BROOKS & ORS. 2 TAX CA SES 490 (HL) DECISION, OBSERVED AS UNDER: 'IT IS CLEAR THEREFORE THAT INCOME MAY ACCRUE TO AN ASSESSEE WITHOUT THE ACTUAL RECEIPT OF THE SAME. IF THE ASSESSEE ACQUIRE S A RIGHT TO RECEIVE THE INCOME, THE INCOME CAN BE SAID TO HAVE ACCRUED TO H IM THOUGH IT MAY BE RECEIVED LATER ON ITS BEING ASCERTAINED. THE BASIC CONCEPTION IS THAT HE MUST HAVE ACQUIRED A RIGHT TO RECEIVE THE INCOME. T HERE MUST BE A DEBT OWED TO HIM BY SOMEBODY.' IN THE LIGHT OF ABOVE DECISION, THE ISSUE NEEDS TO BE EXAMINED. LEARNED CITDEPARTMENTAL REPRESENTATIVE HAS POINTED OUT THAT THE DECIDING FACTOR WOULD BE WHETHER THE GUARANTEE COMMISSION IS REFUND ABLE OR NOT. IF THE GUARANTEE COMMISSION WAS REFUNDABLE THEN IT CANNOT BE SAID THAT ABSOLUTE RIGHT TO THE COMMISSION HAD ACCRUED IN FAV OUR OF THE ASSESSEE AT THE TIME OF EXECUTION OF CONTRACT FOR FURNISHING GUARANTEE BY IT BUT IF THE GUARANTEE COMMISSION WAS NOT DEPENDENT UPON THE PERIOD OF GUARANTEE AND, THUS, HAD ACCRUED IN FAVOUR OF THE A SSESSEE ON THE DATE OF EXECUTION OF CONTRACT FOR FURNISHING GUARANTEE T HEN THE SAME HAS TO BE TAXED IN THE YEAR IN WHICH THE GUARANTEE WAS FURNIS HED IRRESPECTIVE OF 6 ITA NO. 504/PN/2014, A.Y. 2011-12 THE PERIOD TO WHICH GUARANTEE REMAINED ALIVE. THIS IS SO BECAUSE THE GUARANTEE COMMISSION CANNOT BE APPORTIONED WITH REF ERENCE TO THE PERIOD OVER WHICH THE GUARANTEE EXTENDED. EVEN IN T HE CASE OF BANK OF TOKYO LTD. (SUPRA) HEAVILY RELIED UPON BY LEARNED C OUNSEL FOR THE ASSESSEE, THIS PRINCIPLE HAS BEEN ACCEPTED, WHICH I S EVIDENT FROM THE OBSERVATIONS NOTED IN PARA 22 ABOVE. WE, THEREFORE, RESTORE THIS MATTER BACK TO THE FILE OF THE AO TO EXAMINE THE ISSUE IN THE LIGHT OF ABOVE DISCUSSION AND IF HE FINDS THAT AS PER THE TERM, TH E COMMISSION WAS REFUNDABLE ON THE REVOCATION OF GUARANTEE, THEN THE GUARANTEE COMMISSION IS TO BE SPREAD OVER THE PERIOD FOR WHIC H THE GUARANTEE IS GIVEN ELSE IT IS TO BE TAXED IN THE YEAR THE GUARAN TEE HAD ACTUALLY BEEN GIVEN IRRESPECTIVE OF THE PERIOD FOR WHICH IT IS SP READ. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 11.3 RESPECTFULLY FOLLOWING THE ABOVE SAID DECISION WE RESTORE THE ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE TH E ISSUE AFRESH IN THE LIGHT OF THE DIRECTIONS GIVEN THEREIN. THE AO SHALL DECID E THE ISSUE IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. THIS GROU ND BY THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 7. THE LD. DR HAS NOT REBUTTED THE FINDINGS OF THE CO-ORD INATE BENCH. SINCE, THE ISSUE IN PRESET APPEAL IS IDENTICAL, WE RE SPECTFULLY FOLLOW THE ORDER OF TRIBUNAL AND RESTORE THE ISSUE BACK T O THE FILE OF ASSESSING OFFICER TO DECIDE THE SAME IN SIMILAR TERMS. ACCO RDINGLY, GROUND NO. 1 IN APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE . 8. THE SECOND GROUND RAISED IN THE APPEAL BY THE ASSES SEE IS IN RESPECT OF ADDITION OF ` 3,64,174/- ON ACCOUNT OF UNCLAIMED DIVIDEND. WE FIND THIS ISSUE HAS ALSO BEEN ADJUDICATED BY THE TRIBUN AL IN AFORESAID APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 200 9-10. THE TRIBUNAL BY FOLLOWING THE DECISION OF DELHI BENCH OF THE TRIBUN AL IN THE CASE OF ADDL. CIT VS. M/S. GULSHAN MERCANTILE URBAN CO-OPER ATIVE BANK LTD. IN ITA NO. 4981/DEL/2010 FOR THE ASSESSMENT YE AR 2007-08 7 ITA NO. 504/PN/2014, A.Y. 2011-12 DECIDED ON 29-11-2011 ACCEPTED THE APPEAL OF THE ASSES SEE. THE RELEVANT EXTRACT OF THE FINDINGS OF TRIBUNAL ARE AS UNDER: 17. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES. THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT CONTR OVERT THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT DIVIDEND H AS BEEN PAID OUT OF NET INCOME WHICH IS ARRIVED AT AFTER PAYMENT OF INC OME-TAX AND THE UNCLAIMED DIVIDEND TRANSFERRED TO RESERVE FUND IS A N AMOUNT ON WHICH INCOME-TAX HAS ALREADY BEEN PAID AND ADDITION OF TH E SAME AMOUNTS TO DOUBLE TAXATION. 17.1 WE FIND IDENTICAL ISSUE HAD COME UP BEFORE THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF M/S.GULSHAN MERCANTILE URBA N COOPERATIVE BANK LTD. (SUPRA). IN THE SAID DECISION THE TRIBUNAL UPH ELD THE DECISION OF THE CIT(A) WHO DELETED THE ADDITION MADE BY THE AO ON A CCOUNT OF UNCLAIMED DIVIDEND AND THE GROUNDS RAISED BY THE REVENUE WERE DISMISSED. THE OPERATIVE PARA OF THE ORDER OF THE TRIBUNAL READS A S UNDER : 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD AS WELL AS THE ORDER OF LD.CIT( A). THE ASSESSING OFFICE HAD MADE ADDITION ON THE GROUND THAT AMOUNT OF UNPAID DIVIDEND WAS TO BE DEPOSITED IN THE GOVERNMENT ACCOUNT AFTER CERTAIN PERIOD. IN THIS CASE, THERE IS NO DISPUTE THAT THE AMOUNT OF D IVIDEND PAID HAS NOT BEEN CHARGED TO P&L ACCOUNT. IT FORMS PART OF APPRO PRIATION OF INCOME. THEREFORE, WHEN THE ASSESSEE PAID DIVIDEND TO THE S HAREHOLDERS, THE AMOUNT WAS NOT DEBITED TO P&L ACCOUNT AND, THEREFOR E, THE PROVISIONS OF SECTION 41(1) ARE NOT APPLICABLE AS THERE IS NO CES SATION OF LIABILITY. THEREFORE, IN OUR CONSIDERED OPINION, LD.CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION. 17.2 RESPECTFULLY FOLLOWING THE DECISION OF THE DEL HI BENCH OF THE TRIBUNAL, WE SET-ASIDE THE ORDER OF THE CIT(A) ON T HIS ISSUE AND DIRECT THE AO TO DELETE THE ADDITION. THIS GROUND BY THE ASSES SEE IS ACCORDINGLY ALLOWED. RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDINATE BENCH OF TH E TRIBUNAL WE ACCEPT GROUND NO. 2 RAISED IN THE APPEAL OF T HE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION. TH E GROUND NO. 2 OF THE APPEAL BY ASSESSEE IS ACCORDINGLY ALLOWED. 8 ITA NO. 504/PN/2014, A.Y. 2011-12 9. IN GROUND NO. 3 THE ASSESSEE HAS ASSAILED THE CHAR GING OF INTEREST U/S. 234A, 234B AND 234C OF THE ACT. THE CHARGING OF INTE REST UNDER THE AFORESAID SECTIONS IS MANDATORY AND CONSEQUENTIAL. AC CORDINGLY, GROUND NO. 3 RAISED IN THE APPEAL BY THE ASSESSEE IS REJECTED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTY A LLOWED IN THE AFORESAID TERMS. ORDER PRONOUNCED ON MONDAY, THE 02 ND DAY OF MAY, 2016. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 02 ND MAY, 2016 RK *+,%-.#/#)- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A), KOLHAPUR 4. ' / THE CIT-II, KOLHAPUR 5. !*+ %%,- , ,- , . ./0 , / DR, ITAT, B BENCH, PUNE. 6. + 1 23 / GUARD FILE. // ! % // TRUE COPY// #4 / BY ORDER, %5 ,0 / PRIVATE SECRETARY, ,- , / ITAT, PUNE