The Ahmednagar Merchants Co-operative Bank Ltd., Ahmednagar V. Addl. CIT, Ahmednagar Range, Ahmednagar

ITA 712/PUN/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 5261 (ITAT-PUNE)
• Duration Of Justice: 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 20-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MODI
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO.712/PN/2013 A.Y. 2009-10 THE AHMEDNAGAR MERCHANTS CO-OP BANK LTD., PLOT NO.33, MARKET YARD, STATION ROAD, AHMEDNAGAR 414001 PAN : AAAAT3334M APPELLANT VS. ADDL. CIT, AHMEDNAGAR RANGE RESPONDENT APPELLANT BY : SHRI C.H. N ANI WADEKAR RESPONDENT BY : SHRI A.K . MODI DATE OF HEARING: 26.11.2013 DATE OF ORDER : 27.11.2013 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THIS APPEAL HAS BEEN FILED BY ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEAL)-I, (SHORT CIT(A )-I) PUNE FOR A.Y. 2009-10 ON THE FOLLOWING GROUNDS. 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL )L HAS ERRED IN CONFIRMING THE ADDITIONS MADE BY THE A .O WHO HAS DISALLOWED AMORTIZATION OF PREMIUM PAID ON GOVT. SECURITIES RS.23,13,525/-DEBITED TO P & L A/C . THAT THE AMORTIZATION OF PREMIUM PAID ON GOVT. SECURITIES RS.23,13,525/- DEBITED TO P & L A/C AS PER RBI GUIDELINES BE ALLOWED IN FULL AS BEING THE EXPE NSES INCURRED DURING THE COURSE OF BUSINESS OF BANKING. 2. THAT YOUR APPELLANT PRAYS THAT HE MAY BE ALLOWED TO ADD, TO ALTER, OR AMEND OR TO DELETE ANY OF THE ABOVE GR OUNDS OF APPEAL. 2 2. THE ONLY ISSUE IS WITH REGARD TO ADDITION MADE B Y ASSESSING OFFICER WHO HAS DISALLOWED THE AMORTIZATION PREMIUM PAID ON GOVT. SECURITIES OF RS.23,13,525/-. AT THE OUTSET OF HEARING, LEARNED AUTHORIZED REPRESENTATIVE POINTED OUT THAT THIS ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY THE ORDER IN THE C ASE OF NAGAR URBAN CO-OPERATIVE BANK LTD., IN ITA NO.306/PN/2012 , WHEREIN THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER: 4. WE HAVE HEARD THE PARTIES. WE FIND THAT THE IS SUE BEFORE US IS CLEARLY COVERED IN FAVOUR OF THE ASSES SEE BY THE DECISION OF ITAT PUNE BENCH IN THE CASE OF LATUR UR BAN CO- OP. BANK LTD. IN ITA NO. 778 AND 792/PN/2011, ORDER DATED 31-8-2012. THE RELEVANT DISCUSSION AND FINDIN G OF THE TRIBUNAL ON THE ISSUE IS AS UNDER. 13. SO FAR AS GROUND NO. 2 IS CONCERNED, IT IS IN RESPECT OF THE DISALLOWANCES ON THE LOSS ON SALE OF SURPLUS OF RS. 14,70,000/-. THE A.O HAS OBSERVED THAT AN AMOUNT O F RS. 14,70,000/- IS DEBITED TO THE PROFIT & LOSS A/C ON ACCOUNT OF LOSS ON SALE OF SECURITIES. THE A.O HAS FURTHE R OBSERVED THAT THE ASSESSEE IN ITS SUBMISSION HAS STATED THAT SECURITIES OF THE BANK ARE HELD UNDER THE HEAD TO MATURITY CATEGORY AND, THEREFORE, LOSS ARISING ON THE SALE OF INVESTMENT IS IN THE NATURE OF CAPITAL LOSS AND THE REFORE, THE SAME IS NOT ALLOWABLE EXPENDITURE. THE A.O MADE TH E ADDITION TO THE EXTENT OF RS. 14,70,000/-. THE LD CIT(A) CONFIRMED THE ADDITION. 14. WE HAVE HEARD THE PARTIES. THE LD COUNSEL PLAC ED HIS HEAVY RELIANCE ON THE DECISION OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. BANK OF BARODA AND IN THE CASE OF UCO BANK VS. CIT, 240 ITR 355 (SC). IN THE CASE OF BANK OF BARODA (SUPRA), THE ISSUE BEFORE THEIR LORD SHIP WAS WHETHER THE ASSESSEE WAS ENTITLED FOR DEDUCTION ON ACCOUNT OF DEPRECIATION IN THE VALUE OF INVESTMENTS. THE M ETHOD OF VALUATION FOLLOWED BY THE ASSESSEE BANK WAS TO VALU E INVESTMENTS AT COST OR MARKET VALUE WHICHEVER WAS L OWER. THE ASSESSEE HAD CLAIMED THE DEPRECIATION TO THE TU NE OF RS. 11,82,35,007/- AND THE SAID DEPRECIATION WAS CLAIME D AS A DEDUCTION WHICH WAS DISALLOWED BY THE A.O, BUT THE ASSESSEE BANK SUCCEEDED BEFORE THE CIT(A). THE TRIB UNAL CONFIRMED THE ORDER OF THE CIT(A). THE REVENUE CAR RIED THE ISSUE BEFORE THE HONBLE HIGH COURT. THE CORE ISSU E WAS THE METHOD OF VALUATION ADOPTED BY THE ASSESSEE BANK FO R VALUING THE STOCK OF THE SECURITIES. THE HONBLE H IGH COURT 3 FOLLOWED THE DECISION OF HONBLE SUPREME COURT IN T HE CASE OF UNITED COMMERCIAL BANK (SUPRA). 15. IN THE CASE OF UNITED COMMERCIAL BANK (SUPRA), EVEN THE ISSUE OF VALUATION OF THE STOCK IN TRADE OF THE INVESTMENT WAS BEFORE THE HONBLE SUPREME COURT. IN THE CASE OF THE ASSESSEE, THE ISSUE IS REGARDING ALLOWABILITY OF TH E LOSS ON THE SALE OF THE SECURITIES. MERELY BECAUSE THE SEC URITIES ARE KEPT UNDER THE HEAD TILL THE MATURITY, THE SAID SECURITY CANNOT BE TREATED AS A PURELY INVESTMENT. LAW IS WELL SETTLED THAT THE SECURITIES HELD BY THE BANK ARE IN THE NATURE OF STOCK-IN-TRADE. WE MAY LIKE TO QUOTE HER E THE DECISION OF THE HONBLE HIGH COURT OF KERALA IN THE CASE OF CIT VS. NEDUNGADI BANK LTD., 264 ITR 545. IN THE S AID CASE, THE HONBLE HIGH COURT HAS HELD THAT THE SECU RITIES HELD BY THE BANK ARE IN THE NATURE OF STOCK-IN-TRAD E. BOTH THE AUTHORITIES BELOW HAVE MERELY GONE ON THE NOMEN CLATURE OF THE HEAD UNDER WHICH THE SECURITIES ARE HELD. IN OUR CONSIDERED VIEW, NOMENCLATURE CANNOT BE DECISIVE FO R THE ASSESSEE BANK. WE, THEREFORE, HOLD THAT THE LOSS O N THE SALE OF THE SECURITIES IS REVENUE IN NATURE AND SAME IS ALLOWABLE. ACCORDINGLY, GROUND NO. 2 IS ALLOWED. 2.1 MOREOVER, THE SAID ISSUE IS ALSO DECIDED IN FAV OUR OF THE ASSESSEE BY OTHER CO-ORDINATE BENCH IN THE FOLLOWIN G CASES: I) DECISION OF BANGALORE BENCH OF THE TRIBUNAL IN T HE CASE OF KRISHNA GRAMEENA BANK VS. ADDL. CIT (ITA NO . 146/BANG/2011 AND 224/BANG/2011 ORDER DATED 15- 6-2012. II) DECISION OF BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF NATIONAL CO-OP. BANK LTD. VS. JT. CIT RANGE 3 BANGALORE (ITA NO. 1090/BANG/2010 AND 7/BANG/2011, ORDER DATED 11-5-2012). WE THEREFORE SET ASIDE THE ORDER OF THE CIT(A) ON T HIS ISSUE AND ALLOW THE CLAIM OF THE ASSESSEE. 2.1 FACTS BEING SIMILAR, SO FOLLOWING THE SAME REAS ONING, WE HOLD THAT AMORTIZATION PREMIUM PAID ON GOVT. SECURI TIES OF RS.23,13,525/- DEBITED TO PROFIT AND LOSS ACCOUNT, AS PER RBI GUIDELINES HAS TO BE ALLOWED BEING EXPENSES INCURRE D DURING THE COURSE OF BUSINESS OF BANKING, ASSESSING OFFICER IS DIRECTED ACCORDINGLY. 4 3. IN THE RESULT, APPEAL FILED BY ASSESSEE IS ALLOW ED. PRONOUNCED IN THE OPEN COURT ON THIS THE DAY 27 TH OF NOVEMBER, 2013. SD/- SD/- (G.S. PANNU) (SHAILENDRA KUMAR YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 27 TH NOVEMBER 2013 GCVSR COPY TO:- 1) ASSESSEE 2) DEPARTMENT 3) THE CIT(A)-I, PUNE 4) THE CIT-I, PUNE 5) THE DR, B BENCH, I.T.A.T., PUNE. 6) GUARD FILE //TRUE COPY// BY ORDER SENIOR PRIVATE SECRETARY, I.T.A.T., PUNE