Pragathi Grameena Bank, Bellary V. DCIT, Bellary

ITA 632/BANG/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0645 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 16-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JASON P BOAZ
• Assessee Lawyers: VINAY
• Keywords: Capital Gains
• Section: 143(3)

Judgement Text

PAGE 1 OF 5 ITA NOS.632 & 633/B/09 1 IN THE INCOME TAX APPELLATE TRIBUNA L, BANGALORE BENCH A BEFORE SHRI GEORGE GEORGE K, J.M. AND SHRI AKBER BASHA, A.M ITA NOS.632 & 633/BANG/2009 (ASSESSMENT YEARS 2005-06 & 2006-07) PRAGATHI GRAMEENA BANK, HEAD OFFICE : SANGANKAL ROAD, GANDHINAGAR, BELLARY. - APPELLANT VS THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, BELLARY. - RESPONDENT APPELLANT BY : SHRI VINAY RESPONDENT BY : SHRI JASON P BOAZ ORDER PER AKBER BASHA : THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE SEPARATE ORDERS OF LEARNED CIT(A), HUBLI DATED 16TH FEBRUARY, 2009, CONFIRMING THE ORDER OF THE ASSESSING OFFICER U/S 143(3) OF THE ACT FOR THE A.YS. 2005-06 & 2006-07. 2. GROUNDS RAISED BY THE ASSESSEE BANK ARE REPRODUC ED HEREIN BELOW:- I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAD ERRED IN UPHOLDING PAGE 2 OF 5 ITA NOS.632 & 633/B/09 2 THE DISALLOWANCE IN RESPECT OF THE EXPENDITURE ON AMORTIZATION OF PREMIUM PAID ON GOVERNMENT SECURITIES. II) ON THE FACTS, THE LEARNED CIT(A) OUGHT TO HAVE REFRAINED FROM DISALLOWING THE ABOVE CLAIM AND UPHOLDING THE TREATMENT OF THE SAME AS CAPITAL LOSS. III) THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT THE APPELLANT HAVING PURCHASED ON PREMIUM THE GOVERNMENT SECURITIES TO MAINTAIN THE STATUTORY LIQUIDITY RATIO AS PER RBI NORMS, THE EXCESS OVER THE COST PAID WAS TO BE DEFERRED DURING THE REMAINING PERIOD OF SECURITY AS RIGHTLY PROVIDED BY THE APPELLANT AND THE LOSS ON ACCOUNT OF THE MARKET VALUE OF THE SECURITIES AT THE END OF THE YEAR WAS INCIDENTAL LOSS IN THE COURSE OF BANKING BUSINESS AND WAS LIABLE TO BE ALLOWED ACCORDINGLY. IV) WITHOUT PREJUDICE, THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT IF THE EXPENDITURE AS CLAIMED IS REQUIRED TO BE DISALLOWED, THE RESULTANT PROFIT WILL GO UP WHICH WAS AGAIN EXEMPTED U/S 80P(2)(A)(I) OF THE ACT AND CONSEQUENTLY THE DISALLOWANCE AS MADE WAS UNCALLED FOR AND HE OUGHT TO HAVE REFRAINED FROM UPHOLDING THE DISALLOWANCE. V) WITHOUT PREJUDICE, THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT THE CAPITAL GAINS OFFERED ON THE SALE OF SECURITIES AS DECLARED BY THE APPELLANT BY CONSIDERING THE ORIGINAL COST OF SECURITIES IS REQUIRED TO BE REDUCED TO THE EXTENT OF PREMIUM PAID WHEN THE EXPENDITURE CLAIM WAS NOT ALLOWED BY THE ASSESSING AUTHORITY AND TO THIS EXTENT THE ENHANCEMENT PROFIT OUGHT TO HAVE BEEN REDUCED. PAGE 3 OF 5 ITA NOS.632 & 633/B/09 3 3. BRIEF FACTS OF THE CASE, AS PER THE RECORDS OF THE ASSESSMENT YEAR 2005-06, ARE THAT THE ASSESSEE IS A REGIONAL RURAL BANK ESTABLISHED UNDER THE REGIONAL RURAL BANKING A CT, 1976. IN TERMS OF SECTION 22 OF THE ACT, A REGIONAL RURAL BA NK IS DEEMED TO BE A COOPERATIVE SOCIETY FOR THE PURPOSE OF IT ACT. THE ASSESSEE HAS CLAIMED EXPENDITURE ON AMORTIZATION OF PREMIUM PAID ON GOVT. SECURITIES. THE ASSESSING OFFICER DISALLOWED THE A SSESSEE'S CLAIM HOLDING THAT THE ASSESSEE HAS SHOWN THE SECURITIES UNDER INVESTMENT; HENCE THE SAME IS CAPITAL LOSS. THE CI T(A) ALSO CONFIRMED THE ACTION OF THE ASSESSING OFFICER. AGG RIEVED BY THE ORDER OF THE LOWER AUTHORITIES, THE ASSESSEE IS IN APPEAL BEFORE US. 4. AT THE OUTSET, THE LEARNED COUNSEL FOR THE ASSE SSEE MR. VINAY SUBMITTED THAT THE ASSESSEE HAVING PURCHAS ED THE GOVT. SECURITIES ON PREMIUM TO MAINTAIN THE SLR AS PER RB I NORMS, THE EXCESS OVER THE COST PAID WAS TO BE DEFERRED DURING THE REMAINING PERIOD OF SECURITY AS RIGHTLY PROVIDED BY THE ASSESSEE AND THE LOSS ON ACCOUNT OF THE MARKET VALUE OF THE SECURITIES AT THE END OF THE YEAR WAS INCIDENTAL LOSS IN THE COURSE OF BANKING BU SINESS AND WAS LIABLE TO BE ALLOWED ACCORDINGLY. HE PLACED RELIAN CE ON THE FOLLOWING DECISIONS IN SUPPORT OF HIS CLAIM:- ING VYSYA BANK LTD. V DCIT 6 SOT 606 (BANG.) ACIT V PRAGATHI GRAMEEN BANK (ITA NO.543 & 544/BANG/2006) ITO V TUNGABHADRA GRAMEEN BANK (ITA NO. 283/2003) (HC KARNATAKA) PAGE 4 OF 5 ITA NOS.632 & 633/B/09 4 ALTERNATIVELY, HE SUBMITTED THAT IF THE EXPENDITURE AS CLAIMED IS REQUIRED TO BE DISALLOWED, THE RESULTANT PROFIT WIL L GO UP WHICH WAS AGAIN ACCEPTED U/S 80P(2)(A)(I) OF THE ACT AND CONS EQUENTLY, THE DISALLOWANCE AS MADE WAS UNCALLED FOR. 5. THE LEARNED DR SUBMITTED THAT WHILE ADJUDICATIN G THE ISSUE, THE CIT(A) HAS NOT CONSIDERED THE DECISION O F THE ITAT IN THE ASSESSEE'S OWN CASE AND THE DECISION OF THE HON 'BLE KARNATAKA HIGH COURT IN M/S TUNGABHADRA (SUPRA) FOR THE ASST. YEAR 1998-99 AND PRAYED THAT THE CASE MAY BE RESTORED BACK TO THE FILE OF THE CIT(A) TO CONSIDER THESE DECISIONS AND PASS NECESSA RY ORDERS. 6. WE HAVE HEARD BOTH THE PARTIES. WE FIND FROM THE CIT(A)'S ORDER THAT NONE OF THE ASSESSEE'S CASE LAW S REFERRED, I.E. DECISION OF THE ITAT AS WELL AS THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT WAS NOT CONSIDERED BY THE LEARN ED CIT(A). HENCE, IN VIEW OF THE ABOVE AND IN THE INTEREST OF JUSTICE, WE FIND IT PROPER TO RESTORE THE ENTIRE MATTER TO THE FILE OF THE CIT(A) WITH THE DIRECTION TO CONSIDER THE DECISIONS OF THE ITAT AND THE KARNATAKA HIGH COURT RELIED ON BY THE LEARNED COUNSE L FOR THE EARLIER YEARS AND PASS ORDERS AFRESH. PAGE 5 OF 5 ITA NOS.632 & 633/B/09 5 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSE. PRONOUNCED IN THE OPEN COURT ON 20TH NOVEMBER, 2009 . SD/- SD/- (GEORGE GEORGE K) (AKBER BASHA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED :20/11/2009 COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE CIT CONCERNED. 4. THE CIT(A) CONCERNED. 5. DR 6. GF 7. GF, ITAT, NEW DELHI. MSP/17/11/ BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.