ACIT 3, THANE V. THANE BHARAT SAHAKAR BANK LTD, THANE

ITA 7520/MUM/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79403 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 09-07-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 03-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PITAMBAR DAS
• Keywords: Depreciation; Revenue expenditure; Capital expenditure
• Section: 143(3)

Judgement Text

, ( ), IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI . . , , . . , ! BEFORE SHRI H L KARWA, PRESIDENT, & SHRI B R BASKAR AN, AM ./ITA NO.7520/MUM/2010 ( ' # / ASSESSMENT YEAR : 2007-08) THE ACIT CIR. 3 THANE VS. THANE BHARAT SAHAKARI BANK LTD. SHATATTARAKA, BALAJI PRABHU DESHPANDE MARG, NAUPADA, THANE PAN AAAJT1230F ( $% /APPELLANT) ( &'$% / RESPONDENT) APPELLANT BY : SHRI PITAMBAR DAS RESPONDENT BY : NONE DATE OF HEARING : 09.07.2014 DATE OF PRONOUNCEME NT : 09.07.2014 !( / O R D E R PER H L KARWA, PRESIDENT : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF THE CIT(A)-I, THANE, DATED 30.07.2010, RELATING TO A.Y. 2007-08. 2. IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLOW ING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A)-I THANE ERRED IN APPRECIATING THE FACT THAT THE LOSS AT THE TIME OF RECLASSIFICATION OF HTM SECURITIES IS A CAPITAL LOSS AND NOT A REVENUE LOSS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A)-I, THANE HAS ALSO ERRED IN APPRECIATING THAT THE EXPENDITURE OF RS.64,14,292/- ALSO REPRESENTS CAPITAL EXPENDITURE AND NOT REVENUE EXPENDITURE AND THE SAME CANNOT BE ALLOWED AS DEDUC TION AS SUCH. 2 ITA NO.7520/MUM/2010 AY:2007-08 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS A CO-OPERATIVE SOCIETY ENGAGED IN THE BANKING BUSINESS. FOR THE A SSESSMENT YEAR 2007-08, THE ASSESSEE FILED ITS RETURN OF INCOME ON 31.10.2007 D ECLARING TOTAL INCOME AT RS.4,38,38,346/-. THE CASE WAS SELECTED UNDER COMP ULSORY CATEGORY AS PER THE BOARDS GUIDELINES AND ASSESSMENT WAS FINALIZED ON 2 9.12.2009 U/S. 143(3) OF THE I.T.ACT 1961 DETERMINING THE TOTAL INCOME OF THE AS SESSEE AT RS.6,83,64,720/-. IN THE ASSESSMENT ORDER THE AO HAS MENTIONED THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF RS.1,91,20,802/- UNDER THE HEAD AMORTIZA TION OF PREMIUM AND DEPRECIATION OF GOVERNMENT SECURITIES SHIFTED TO HT M (HELD TO MATURITY). THE AO DISALLOWED THE ENTIRE AMOUNT OF RS.1,91,20,802/-, W HICH INCLUDED DIMINUTION IN THE MARKET VALUE OF RS.1,27,06,510/- AND ALSO AMORTIZAT ION OF RS.64,14,292/-. 4. ON APPEAL, THE CIT(A) ALLOWED THE CLAIM OF THE A SSESSEE OBSERVING AS UNDER: 4.3 THE VIEW TAKEN BY THE AO IN DISALLOWING THE CL AIM AND THE ARGUMENT OF THE APPELLANT AGAINST IT ARE CONSIDERED I FIND THAT, THE RESERVE BANK OF INDIA (RBI) VIDE THEIR GUIDELINES D ATED 16/10/08 HAVE PERMITTED WRITE OFF OF LOSSES ARISING FROM SHIFTING OF SECURITIES FROM ONE CATEGORY TO ANOTHER CATEGORY IN RESPECT OF INVESTME NT IN GOVERNMENT SECURITIES. IN VIEW OF THIS, I HOLD THAT, THE EXPE NSES HAVE BEEN RIGHTLY WRITE OFF. I, THUS, HOLD THAT, THE DISALLOWANCE IS NOT IN ACCORDANCE WITH LAW. I DIRECT THE AO TO DELETE THE ADDITION OF RS. 1,27,06,510/- 4.4 AS REGARDS THE DISALLOWANCE OF RS.64,14,292/-, BEING PROPORTIONATE WRITE OFF OF PREMIUM PAID ON SECURITI ES HELD ON MATURITY, IT IS SUBMITTED ON BEHALF OF THE APPELLANT SOCIETY THAT, THE APPELLANT PURCHASED CERTAIN SECURITIES AT A PRICE , HIGHER TH AN THE MATURITY VALUE. THE SAID EXCESS AMOUNT OR PREMIUM IS TO BE WRITTEN OFF ON PROPORTIONATE BASIS FROM YEAR TO YEAR. RS 64,14,29 2/- REPRESENTS SUCH PROPORTIONATE EXPENDITURE WRITTEN OFF IN THE YEAR U NDER CONSIDERATION, THE APPELLANT HAS STATED 4.5 THE SUBMISSION IS CONSIDERED. I FIND THAT, THE RE IS MERIT IN THE ARGUMENT OF THE APPELLANT. ACCORDING TO ME, THE CL AIM OF SUCH RIGHT OFF IS WITHIN THE FOUR CORNERS OF LAW AND, THEREFORE, I HOLD THAT, THE ASSESSEE IS ENTITLED FOR SUCH WRITE OFF. THE AO IS DIRECTED TO DELETE THE ADDITION. THE GROUND IS ALLOWED. 5. AFTER HEARING THE LEARNED DR WE FIND THAT THE AB OVE ISSUES ARE SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE R EVENUE BY THE ORDER OF THIS BENCH OF THE TRIBUNAL DATED 17.10.2010 PASSED IN TH E ASSESSEES CASE IN ITA NO, 7559/MUM/2011 RELATING TO A.Y. 2008-09, WHEREIN THE TRIBUNAL HAS HELD AS UNDER: 3 ITA NO.7520/MUM/2010 AY:2007-08 3. BEFORE US, DEPARTMENTAL REPRESENTATIVE (DR) REL IED UPON THE ORDERS OF THE AO. AUITHORISED REPRESENTATIVE (AR) RELIED UPON THE ORDER OF THE CIT(A) AND SUBMITTED A COPY OF THE ORD ER DELIVERED BY A BENCH OF PUNE IN THE CASE OF LATUR URBAN CO-OP BANK LTD. (ITA NO. 778/PN/2011 AY 2007-08 DT. 31-08-2012) 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND GONE THR OUGH THE MATERIAL PLACED BEFORE US. FROM THE CIRCULAR ISSUE D BY THE RBI DT. 28- 03-2005 AND THE GUIDELINES OF 16-10-2008, IT IS CLE AR THAT THE ASSESSEE WAS FOLLOWING MANDATORY DIRECTIVES OF RBI AND LOSS SUFFERED BY IT WAS A RESULT OF TRADING IN GOVERNMENT SECURITIES. WE ARE OF THE OPINION THAT THE ORDER PASSED BY THE FAA DOES NOT SUFFER FROM AN Y LEGAL INFIRMITY OR ILLEGALITY. THEREFORE, UPHOLDING THE ORDER OF THE FAA, WE REJECT GROUND NOS. 1 TO 4 FILED BY THE AO. 6. THE FACTS OF THE PRESENT CASE AND THE ISSUES INV OLVED ARE SIMILAR TO THAT OF A Y 2008-09 AND, THEREFORE, THE FINDINGS GIVEN BY THE T RIBUNAL IN ITS ORDER DATED 17.10.2012 ARE SQUARELY APPLICABLE TO THE YEAR UNDE R CONSIDERATION ALSO. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL PA SSED IN THE ASSESEES CASE FOR A.Y. 2008-09 (SUPRA), WE DO NOT FIND ANY MERITS IN THE G ROUNDS RAISED BY THE REVENUE IN THIS APPEAL. ACCORDINGLY, WE DISMISS THE APPEAL OF THE REVENUE. 7. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 09 TH DAY OF JULY, 2014. SD/- SD/- (B R BASKARAN) (H L KARWA) ACCOUNTANT MEMBER PRESIDENT MUMBAI, DT : 9 TH JULY, 2014 SA COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE C.I.T, CONCERNED 4. THE CIT (A)-CONCERNED 5. THE DR, MUMBAI E BENCH BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI