DCIT, Circle-3(2), Ahmedabad V. The Janta Commercial Co. Op. Bank Ltd., Ahmedabad

ITA 538/AHD/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8698 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 06-01-2020
• Assessment Year: 2013-2014
• Appeal Filed On: 08-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NK GOEL
• Keywords: Business income; Depreciation; Carry forward of business losses; Diversion of income; Liquidation
• Section: 143(3); 72(1); 195

Judgement Text

, SMC IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO. 538/AHD/2018 ( ASSESSMENT YEAR : 2013-14) DCIT CIR. 3(2), A-509, 5 TH FLOOR, PRATYAKSHA KAR BHAVAN, NR. PANJRA POLE, AMBAWADI, AHMEDABAD 380 015 / VS. M/S. THE JANTA COMMERCIAL CO. OP BANK LTD. DANA BAZAR, AT DHOLKA, AHMEDABAD - 382710 ./ ./ PAN/GIR NO. : AAAAT1245P ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI N. K. GOEL, SR. D.R. / RESPONDENT BY : NONE DATE OF HEARING 06/01/2020 !'# / DATE OF PRONOUNCEMENT 17/01/2020 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-3, AHMEDABAD (CIT(A) IN SHORT), DATED 18.12.2017 ARIS ING IN THE ASSESSMENT ORDER DATED 16.03.2016 PASSED BY THE ASS ESSING OFFICER (AO) UNDER S. 143(3) OF THE INCOME TAX ACT, 1961 (THE AC T) CONCERNING AY 2013-14. ITA NO.538/AHD/18 [DCIT VS. M/S. THE JANTA COMMERCIAL CO OP BANK LTD.] A.Y. 2013-14 - 2 - 2. THE GROUND OF APPEAL FILED BY THE REVENUE READS AS UNDER: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF CARRY FORWARD OF LOSSES ON ACCOUNT OF UNREALIZED AMOUNT OF ADVANCES AMOUNTING TO RS.(-)18,14,14,727/ -, IGNORING THE PROVISIONS OF SECTION 139(3) OF THE IT ACT, 196 1. 3. NONE APPEARED FOR THE ASSESSEE. THE APPEAL OF THE REVENUE IS ACCORDINGLY HEARD EX PARTE IN THE ABSENCE OF THE ASSESSEE. 4. WHEN THE MATTER WAS CALLED FOR HEARING, THE LEAR NED DR FOR THE REVENUE RELIED UPON THE ASSESSMENT ORDER. 5. WE HAVE PERUSED THE ORDER OF THE AO AS WELL AS T HE APPELLATE ORDER OF THE CIT(A). 6. ON PERUSAL, IT IS NOTICED THAT THE ASSESSEE, A C OOPERATIVE BANK, WAS DIRECTED TO BE WOUND UP AS ON 02.06.2003 VIDE ORDER OF GOVERNMENT OF GUJARAT UNDER COOPERATIVE SOCIETY ACT, 1961. CONSE QUENTLY, THE BOARD OF DIRECTOR OF BANK WAS SUPERSEDED AND OFFICIAL LIQ UIDATOR BEING AN OFFICIAL OF COOPERATIVE DEPARTMENT OF GOVERNMENT OF GUJARAT WAS APPOINTED TO ADMINISTER REALIZATION OF ASSETS AND R EPAYMENT OF LIABILITIES. BANK UNDER LIQUIDATION WAS ALSO AUTHORIZED TO APPRO ACH DEPOSIT INSURANCE AND CREDIT GUARANTEE CORPORATION LTD. (DI CGCI) BEING SUBSIDIARY OF RESERVE BANK OF INDIA FOR THE PURPOSE S OF REIMBURSEMENT OF INSURANCE CLAIM OF DEPOSIT WITH BANK UNDER LIQUI DATION WITHIN THE LIMIT OF RS.1 LAKH OR LESS AND ACCORDINGLY DICGCI H AS PAID BANK UNDER LIQUIDATION RS.3,65,71,875/- WHICH WAS UTILIZED FOR THE PURPOSE OF REPAYMENT OF DEPOSITORS TO THE EXTENT OF RS.1 LAKH. HOWEVER, ACCORDING TO DICGCI ACT, BANK WAS AUTHORIZED TO REALIZE ITS A SSETS AND ADVANCES COERCIVELY AND WHATEVER PROCEEDS ARE REALIZED, BANK COULD UTILIZE SUCH PROCEEDS FOR REPAYMENT OF LIABILITIES OF DEPOSITORS AND OTHER LIABILITIES. IN VIEW OF THE AFORESAID MANDATE AVAILABLE BY VIRTU E OF DICGCI ACT, A DEFICIT OF RS.1,05,461/- AROSE IN THE HANDS OF THE ASSESSEE IN THE PROCESS OF RECOVERY AND REPAYMENT. UNDER THE CIRCUMSTANCES , IT WAS THE CASE OF THE ASSESSEE BEFORE THE CIT(A) THAT BANK UNDER LIQU IDATION SHALL NOT HAVE ITA NO.538/AHD/18 [DCIT VS. M/S. THE JANTA COMMERCIAL CO OP BANK LTD.] A.Y. 2013-14 - 3 - ANY TAXABLE INCOME TILL THE LIABILITY OF DICGCI IS FULLY PAID OFF DUE TO DIVERSION OF INCOME AT SOURCE. 7. THE CIT(A) HAS EXAMINED THE ISSUE THREADBARE AND HAS RECORDED A FINDING IN FAVOUR OF THE ASSESSEE FOR NON-APPLICABI LITY OF SECTION 139(3) OF THE ACT IN THE CIRCUMSTANCES WHICH READS AS UNDE R: 4. DECISIONS: I HAVE CONSIDERED THE FACTS OF THE CASE AND THE ARGUMENT OF THE APPELLANT CAREFULLY. ALL THREE GROU NDS ARE TAKEN TOGETHER FOR ADJUDICATION. THE FACTUAL MATRIX AS PE R PARA-3 ABOVE HAVE BEEN KEPT IN MIND WHILE DECIDING THE ISSUE. IT IS UNDISPUTED FACT THAT BANK IS UNDER LIQUIDATIO N WITH EFFECT FROM 28/03/2003 AND ADMINISTRATION OF BANK IS IN HA NDS OF OFFICIAL OF COOPERATIVE DEPARTMENT OF GOVT. OF GUJARAT FOR THE PURPOSE OF REALISING ADVANCES UNDER VARIOUS LEGAL METHODS PROVIDED IN GU JARAT COOPERATIVE SOCIETIES ACT. 1962. BANK RETAINS PART OF THE STAFF WHEN BANK WAS IN OPERATION AS IDENTITY AND HISTORY OF ADVANCES CAN B E KNOWN FROM SUCH STAFF ONLY. BANK HAS ALSO AVAILED INSURANCE FROM D ICGCI AND AN AMOUNT OF RS. 3,65,71,875/- IS PAYABLE TO DICGCI AS OF DEPOSIT INSURANCE CLAIM AS AT 31/03/2014. AFTER THE ABOVE J UDGEMENT OF RAGUPATHI RAGAVAN(SUPRA) BANK HAS REPAID RS.3,65,71 ,875/- TO DICGCI AND PRESENT LIABILITY TO DICGCI IS RS. NILL. DURING THE YEAR APPELLANT BANK HAS EARNED INTEREST OF RS. 40,75,681 /- AND SHARE DIVIDEND OF RS. 69,245/- AFTER MEETING ALL EXPENSES INCLUDING DEPRECIATION OF RS. 2,39,180/- THERE IS SURPLUS OF RS. 29,31,478/- HOWEVER APPELLANT HAS DISALLOWED AFORESAID DEPRECIA TION OF RS. 2,39,18G/- AND HAS CLAIMED DEPRECIATION RS. 32,882/ - AND ITS COMPUTATION IS PROVIDED IN STATEMENT OF TOTAL INCOM E WHICH HAS BEEN ALLOWED BY DOT. NOW THE DISPUTE REMAINS AS TO ALLOW ANCE OF LOSS OF UNREALISED AMOUNT OF RS. 18,14,14,727/- AGAINST INC OME OF CURRENT YEAR AND AS CLAIMED SAID INTEREST AND DIVIDEND ARE TAXAB LE UNDER INCOME FROM OTHER SOURCES AND NOT PART OF BUSINESS INCOME AND SUCH SETOFF HAS TO BE ALLOWED U/S. 71 OF THE IT. ACT, 1961 BEING IN TRA HEAD SETOFF OF LOSSES. DCIT HAS JUSTIFIED SUCH DISALLOWANCE U/S. 1 39(3) BEING PRECONDITION OF FILING OF RETURN OF INCOME WITHIN D UE DATE. HOWEVER PLAIN READING OF SEC. 139(3) OF THE IT.ACT, 1961, S UCH PRECONDITION IS ONLY FOR CARRY FORWARD OF BUSINESS LOSSES U/S. 72(1 ) OF THE IT.ACT,1961 AND SUCH LEGAL SITUATION HAS BEEN UPHELD IN THE CAS E OF PEERLESS GENERAL FINANCE AND INVESTMENT CO. LTD. V/S. CIT (2 015 378 ITR 718 (CAL) AS WELL AS CIT V/S. BRITISH INSULATED CALENDER'S LIMITED 202 ITR 354 (BOMBAY) AND ACIT V/S. SANJAY B ASRATHI GEMS LTD 84 TAXMANN.COM 138 (JAIPUR). UNDER THE CIRCUMSTANCES, WE AGREE WITH THE SUBMISSION OF ASSE SSEE FOR SETOFF OF LOSS AGAINST CURRENT YEAR INCOME AND ASSESSEE SHALL NOT HAVE RIGHT OF CARRY FORWARD OF BUSINESS LOSS U/S. 72(1) OF THE I. T.ACT, 1961. WHILE CONSIDERING ALTERNATIVE PLEA OF DIVERSION OF INCOME AT SOURCE, I HAVE GONE THROUGH JUDGEMENT OF SUPREME CO URT AS WELL AS JUDGEMENT OF GUJARAT HIGH COURT IN THE CASE OF VISN AGAR NAGARIK SAHAKARI BANK LTD. (SUPRA) AS JURISDICTIONAL HIGH C OURT HAS UPHELD STATUTORY OBLIGATION UPON BANKS UNDER LIQUIDATION A VAILING INSURANCE CLAIM FOR DEPOSITS AND IN FACT SUCH LIABILITY HAS B EEN FULLY PAID OFF TO ITA NO.538/AHD/18 [DCIT VS. M/S. THE JANTA COMMERCIAL CO OP BANK LTD.] A.Y. 2013-14 - 4 - DICGCI AND THEREFORE TILL SUCH OBLIGATION ALL FUNDS REALISED BY BANK UNDER LIQUIDATION ARE DIVERTED AT SOURCE ENTIRE INC OME OF ASSESSEE BASED ON OBSERVATION IN THE CASE OF MOTI LAL CHHADA MI JAIN V/S CIT 190 ITR 1 (SC) R.W JUDGEMENT IN THE CASE OF SMT SAR LA DEVI K. V/S. CIT 222 ITR 211 (KERALA) AND ASSOCIATED. POWER COMPANY LTD. 218 I T R 195 (SC.) THEREFORE ENTIRE INTEREST INCOME AND SHAR E DIVIDEND INCOME IS DIVERTED AT SOURCE AND BANK UNDER LIQUIDATION HAS N O DISCRETION OR AUTHORITY TO APPLY SUCH FUNDS AS IT WISHES AND HENC E SUCH FUNDS ARE NOT AVAILABLE TO APPELLANT AS INCOME AND THEREFORE SUCH INCOME IS NOT TAXABLE IN THE HANDS OF APPELLANT. IN VIEW OF FACT S AND RATIO LAID DOWN IN THE CASE LAWS (SUPRA), GROUND NO.1 & 2 ARE ALLOWED . AS APPELLANT HAS NOT MADE ANY SUBMISSIONS ON CAPITAL NATURE OF R ECEIPTS SUBSEQUENT TO LIQUIDATION AS PER CONTENTION RAISED IN GROUND N O.3. IN VIEW OF LACK OF FACTUAL SUBMISSIONS AS REGARDS CAPITAL NATURE OF RECEIPTS IN THE EVENT OF LIQUIDATION, I AM UNABLE TO DEAL WITH SUCH GROUN D, THEREFORE, GROUND NO.3 IS HEREBY DISMISSED. THE ORDER OF CIT(A) IS SELF EXPLANATORY. 8. WE ARE IN COMPLETE AGREEMENT WITH THE FINDINGS O F THE CIT(A) NOTED ABOVE IN THE LIGHT OF VARIOUS DECISIONS NOTED ABOVE. WE THUS DECLINE TO INTERFERE. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. SD/- SD/- (MAHAVIR PRASAD) (PRADIP KUMAR KE DIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 17/01/2020 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 17/01/202 0