The ACIT,S.K.Circle, Himatnagar V. The Modasa Nagrik Sahakari Bank Ltd., Modasa

ITA 802/AHD/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94570 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 08-10-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 11-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Assessee Lawyers: A C SHAH
• Keywords: Depreciation

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD , , BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER 1. ./ I.T.A. NO.802/AHD/2012 AY 2007-08 2. ./ I.T.A.NO.1104/AHD/2012 AY 2008-09 1 - 2 .THE ACIT S.K.CIRCLE AMBALAL COMPLEX B/H.MEHTA PETROL PUMP HIMATNAGAR-383 001 / VS. 1 - 2. THE MODASA NAGRIK SAHAKARI BANK LTD. NR.NAGARPALIKA MODASA 383 001 ' ./ ./ PAN/GIR NO. : AAAAT 0525 G ( '% / APPELLANT ) .. ( &''% / RESPONDENT ) '% ( / APPELLANT BY : SHRI DINESH SINGH, SR.DR &''% ) ( / RESPONDENT BY : SHRI A.C. SHAH, AR * ) / DATE OF HEARING 08/10/2015 +,-. ) / DATE OF PRONOUNCEMENT 21/10/2015 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : BOTH THESE APPEALS BY THE REVENUE IN THE CASE OF S AME ASSESSEE PERTAINING TO ASSESSMENT YEARS (AYS) 2007-08 AND 20 08-09 ARE DIRECTED AGAINST THE SEPARATE ORDERS OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-VIII, AHMEDABAD [CIT(A) IN SHORT] DATED 30/01/2012 & 17/02/2012 RESPECTIVELY. SINCE COMMON ISSUES ARE INVOLVED IN BOTH ITA NOS.802 & 1104/AHD/12 ACIT VS. MODASA NAGRIK SAHAKARI BANK LTD. ASST.YEARS 2007-08 & 2008-09 RESPECTIVELY - 2 - THESE APPEALS, THESE WERE HEARD TOGETHER AND ARE BE ING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST, WE TAKE UP THE REVENUES APPEAL IN ITA NO .802/AHD/2012 FOR AY 2007-08. THE REVENUE HAS RAISED THE FOLLOW ING GROUNDS OF APPEAL:- 1. THE LD.CIT(A) HA ERRED IN LAW AND ON FACTS IN DELE TING THE ADDITION OF RS.18,66,000/- ON ACCOUNT OF INVESTMENT DEPRECIA TION ACCOUNT WITHOUT APPRECIATING THE FACT THAT THE SAID AMOUNT WAS NOTIONAL DEPRECIATION OF GOVERNMENT OF INDIA SECURITIES AS O N 31.3.2007 WHICH WERE HELD BY THE BANK AS INVESTMENT AND NOT A S STOCK. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER. 3. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD.C IT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE REST ORED TO THE ABOVE EXTENT. 2.1. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143( 3) OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 09.12.2009, THEREBY THE ASSESSING OFFICER (AO IN SHORT) MADE VARIOUS ADDITIONS IN RESPECT OF DISALLOWANCE OF THE NOTIONAL DEPRECIATION OF INVESTMENTS OF RS.18,66,000/-, DISALLOWANCE OF D EDUCTION U/S.80P(2)(C)(II) OF THE ACT OF RS.50,000/- AND DIS ALLOWANCE OF DEPRECIATION ON LOCKERS @ 15% OF RS.79,038/-. THE AO HAS ALSO MADE ADDITION OF RS.5,000/- IN RESPECT OF DISALLOWANCE O F DEPRECIATION ON BUILDING AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. THE AO HAD MADE TOTAL ADDITION OF RS.20,00,038/- THAT INCL UDED A SUM OF ITA NOS.802 & 1104/AHD/12 ACIT VS. MODASA NAGRIK SAHAKARI BANK LTD. ASST.YEARS 2007-08 & 2008-09 RESPECTIVELY - 3 - RS.18,66,000/- CLAIMED ON ACCOUNT OF PROVISION IN R ESPECT OF NOTIONAL DEPRECIATION OF GOVERNMENT OF INDIA SECURITIES AS ON 31/03/2007. THE ASSESSEE BEING AGGRIEVED BY THE ASSESSMENT ORDER, P REFERRED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUB MISSIONS OF THE ASSESSEE PARTLY ALLOWED THE APPEAL. WHILE PARTLY A LLOWING THE ASSESSEES APPEAL, THE LD.CIT(A) HAS FOLLOWED THE DECISION OF THE COORDINATE BENCH (ITAT B BENCH AHMEDABAD) RENDERED IN THE CASE OF ACIT VS. THE SABARKANTHA DIST.CENTRAL CO-OP.BANK LTD. IN ITA NO. 626/AHD/2012 FOR AY 2007-08, DATED 05/06/2015 AND ALSO THE RATIO LA ID DOWN BY THE HONBLE APEX COURT RENDERED IN THE CASE OF UNITED C OMMERCIAL BANK VS. CIT REPORTED AT 240 ITR 355 (SC). AGGRIEVED BY THE ORDER OF THE LD.CIT(A), THE REVENUE IS NOW IN APPEAL BEFORE US. 3. THE ONLY EFFECTIVE GROUND IN THIS REVENUES APPE AL IS AGAINST DELETION OF ADDITION OF RS.18,66,000/- ON ACCOUNT O F INVESTMENT DEPRECIATION ACCOUNT WITHOUT APPRECIATING THE FACT THAT THE SAID AMOUNT WAS NOTIONAL DEPRECIATION OF GOVERNMENT OF INDIA SE CURITIES AS ON 31.3.2007 WHICH WERE HELD BY THE BANK AS INVESTMENT AND NOT AS STOCK. 3.1. THE LD.SR.DR SUPPORTED THE ORDER OF THE AO AND SUBMITTED THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITIO N. 3.2. ON THE CONTRARY, LD.COUNSEL FOR THE ASSESSEE S UBMITTED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF ASSESSEE BY THE DECISION OF COORDINATE BENCH RENDERED IN THE CASE OF ACIT VS. T HE SABARKANTHA DIST.CENTRAL CO-OP.BANK LTD.(SUPRA). ITA NOS.802 & 1104/AHD/12 ACIT VS. MODASA NAGRIK SAHAKARI BANK LTD. ASST.YEARS 2007-08 & 2008-09 RESPECTIVELY - 4 - 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE JUDGEMENT/DECISION RELIED UPON BY TH E LD.COUNSEL FOR THE ASSESSEE. WE FIND THAT THE LD.CIT(A) HAS DECIDED T HIS ISSUE IN PARAS-3 TO 3.2 OF HIS ORDER, BY OBSERVING AS UNDER:- 3. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND T HE SUBMISSION OF THE APPELLANT. AS PER THE RBI NORMS, THE BANK DEALS IN SECURITIES AND THE CLAIM IS ON ACCOUNT OF FALL IN THE VALUE OF THE SEC URITIES AS ON THE DATE OF CLOSING YEARS. SUCH LOSS IS ALLOWABLE IN VIEW OF TH E SUPREME COURT DECISION IN THE CASE OF UNITED COMMERCIAL BOMBAY VS .CIT 240 ITR 355. ALSO THE ASSESSEE COMPANY FOLLOWS MERCANTILE METHOD OF ACCOUNTING CONSISTENTLY. THE DEPRECIATION IN INVEST MENT HAS BEEN PROVIDED AND ALLOWED CONSISTENTLY. THE A.O HAS GOT CONFUSED WITH THE FACTS. THE RBI REQUIRES BANK TO MAINTAIN STATUTORY LIQUIDITY RATIO [SLR] AND IS REQUIRED TO INVEST THE FUNDS IN GOVERN MENT SECURITIES TO SAFEGUARD THE INTEREST OF DEPOSITORS. THE INVESTMEN TS SO MADE ARE STOCK- IN- TRADE THOUGH IT IS MENTIONED AS INVESTMENT IN B ALANCE SHEET. THE BANK IS REQUIRED TO AMORTIZE THE PREMIUM PAID ON SE CURITIES OVER ITS LIFE IN CASE OF INVESTMENTS HELD TO MATURITY. IN CASE OF THE INVESTMENT HELD FOR TRADING AND AVAILABLE FOR SALE, THEY ARE TO BE VALUED MARK TO MARKET I.E. AT COST OR MARKET RATE WHICHEVER IS LOWER, AS HAS BEEN A GUIDING AND PRUDENTIAL NORM PART OF MASTER CIRCULAR DATED 2 ND JULY 2007 ISSUED BY RBI. 3.1 THE ASSESSEE BANK FOLLOWS MERCANTILE METHOD OF ACCOUNTING CONSISTENTLY. THE DEPRECIATION IN INVESTMENT HAS BEEN PROVIDED AN D ALLOWED CONSISTENTLY UNLESS THE AO HAS GIVEN A FIND ING CONTRARY TO THAT EFFECT THE BOOKS CANNOT BE REJECTED. THE RATIO LAID DOWN BY SC IN THE CASE OF UNITED COMMERCIAL BANK V/S. CIT 240 ITR 355 IS FOLLOWED RECENTLY BY THE SC IN THE CASE OF CIT V/S. WOODWARD GOVERNOR INDIA (P) LTD. 312 ITR 254. IT IS HELD AS UNDER: ITA NOS.802 & 1104/AHD/12 ACIT VS. MODASA NAGRIK SAHAKARI BANK LTD. ASST.YEARS 2007-08 & 2008-09 RESPECTIVELY - 5 - 'UNDER THE MERCANTILE SYSTEM OF ACCOUNTING, WHAT IS DUE IS BROUGHT INTO CREDIT BEFORE IT IS ACTUALLY RECEIVED; IT BRINGS INTO DEBIT AND EXPENDITURE FOR WHICH A LEGAL LIABILITY H AS BEEN INCURRED BEFORE IT IS ACTUALLY DISBURSED, (SEE JUDG MENT OF THIS COURT IN THE CASE OF UNITED COMMERCIAL BANK V/S. CI T 240 ITR 355. THEREFORE, THE ACCOUNTING METHOD FOLLOWED BY A N ASSESSEE CONTINUOUSLY FOR A GIVEN PERIOD OF TIME NEEDS TO BE PRESUMED TO BE CORRECT TILL THE AO COMES TO THE CONCLUSION FOR REASONS TO BE GIVEN THAT THE SYSTEM DOES NOT REFLECT THE TRUE AND CORRECT PROFITS.' 3.2 ON THE BASIS OF THE ABOVE DISCUSSION AND FOLLO WING THE DECISION OF THE UNDERSIGNED ON IDENTICAL ISSUE IN THE CASE OF T HE S. K. DIST.CO- OPERATIVE BANK LTD. FOR A.Y. 07-08 IN APPEAL NO.CIT (A)- VIII/DC IT/S.K.CIR./139/10-11 DATED 19-12-11 AND FOLLOWING THE RATIO OF UNITED COMMERCIAL BANK V/S. CIT 240 ITR 355 AND WOODWARD G OVERNOR INDIA (P) LTD. 312 ITR 254, THE CLAIM OF THE ASSESSEE IS ALLOWED. THE A.O IS DIRECTED TO ALLOW THE DEDUCTION. 4.1. FURTHER, WE FIND THAT THE COORDINATE BENCH IN THE CASE OF ACIT VS. THE SABARKANTHA DIST.CENTRAL CO-OP.BANK LTD.(SUPRA) HAS HELD AS UNDER:- 4. WE HAVE HEARD THE LD.SR.DR, PERUSED THE MATERIA L AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. WE FIND THAT THE LD.CIT(A) HAS FOLLOWED THE DECISION OF HIS PREDECESSOR PASSED FOR AY 2004-05 AND ALSO THE DECISION OF THE COORDI NATE BENCH PASSED IN ITA NO.1819 & 1820/AHD/2005 DATED 29/09/2005 AS WELL AS THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF UNITED COMMERCIAL BANK VS. CIT REPORTED AT (1999)240 ITR 355(SC) AND CIT VS. WOODWARD GOVERNOR INDIA(P.)LTD. REPORTED AT (20 09) 312 ITR 254(SC) WHILE ALLOWING THE CLAIM OF ASSESSEE. THE LD.SR.DR COULD NOT DISTINGUISH THE DECISION RELIED UPON BY THE LD.CIT( A). THEREFORE, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF T HE LD.CIT(A), SAME IS HEREBY UPHELD. THUS, GROUND NO.1 OF REVENUES APP EAL IS DISMISSED. ITA NOS.802 & 1104/AHD/12 ACIT VS. MODASA NAGRIK SAHAKARI BANK LTD. ASST.YEARS 2007-08 & 2008-09 RESPECTIVELY - 6 - 4.2. SINCE THE FACTS ARE IDENTICAL TO THE FACTS AS WERE RAISED IN THE CASE OF ASST.CIT VS. THE SABARKANTHA DIST.CENTRAL CO-OP. BANK LTD. IN ITA NO.626/AHD/2012 FOR AY 2007-08, WHEREIN THE TRIBUNA L DISMISSED THE REVENUES APPEAL. SINCE THE REVENUE HAS NOT POINTE D OUT ANY CHANGE INTO THE FACTS AND CIRCUMSTANCES OF THE PRESENT CAS E, THEREFORE TAKING A CONSISTENT VIEW, WE DO NOT SEE ANY REASON TO INTER FERE WITH THE ORDER OF THE LD.CIT(A), SAME IS HEREBY UPHELD. THUS, THE G ROUND OF THE REVENUES APPEAL IS REJECTED. AS A RESULT, THE AP PEAL OF THE REVENUE IN ITA NO.802/AHD/2012 FOR AY 2007-08 IS DISMISSED. 5. NOW, WE TAKE UP THE REVENUES APPEAL IN ITA NO.1104/AHD/ 2012 FOR AY 2008-09 , WHEREIN FOLLOWING GROUNDS HAVE BEEN RAISED BY THE REVENUE:- 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.23,41,500/- ON ACCOUNT OF INVESTMENT DEPRECIATION ACCOUNT WITHOUT APPRECIATING THE FACT THAT THE SAID AMOUNT WAS NOTIONAL DEPRECIATION OF GOVERNMENT OF INDIA SECURI TIES AS ON 31.3.2008 WHICH WERE HELD BY THE BANK AS INVESTMENT AND NOT AS STOCK. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD.CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER. 3. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE L D.CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE REST ORED TO THE ABOVE EXTENT. 5.1. SINCE IT WAS A COMMON ISSUE BETWEEN THE PARTIE S AND THE FACTS AND CIRCUMSTANCES IN THE PRESENT CASE ARE ALSO IDENTICA L TO THOSE CONSIDERED BY US IN ASSESSEES OWN CASE IN ITA NO.802/AHD/2012 FO R AY 2007- 08(SUPRA), FOLLOWING THE SAID PRECEDENT THE PRESENT CLAIM OF THE ASSESSEE ITA NOS.802 & 1104/AHD/12 ACIT VS. MODASA NAGRIK SAHAKARI BANK LTD. ASST.YEARS 2007-08 & 2008-09 RESPECTIVELY - 7 - DESERVES TO BE UPHELD. THUS, THE ORDER OF THE CIT(A ) IS HEREBY AFFIRMED AND THE REVENUE HAS TO FAIL ON THIS ASPECT. AS A RESULT, THE APPEAL OF THE REVENUE IN ITA NO.1104/AHD/2012 FOR AY 2008-09 IS D ISMISSED. 6. IN THE COMBINED RESULT, THE APPEALS OF THE REVEN UE FOR AYS 2007-08 & 2008-09 BOTH ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON WEDNESDAY, THE 21 ST DAY OF OCTOBER, 2015 AT AHMEDABAD. SD/- SD/- ( ) ( ) ( ANIL CHATURVEDI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 21/ 10 /2015 2.., .../ T.C. NAIR, SR. PS !'#$%$&' / COPY OF THE ORDER FORWARDED TO : 1. '% / THE APPELLANT 2. &''% / THE RESPONDENT. 3. 345 6 / CONCERNED CIT 4. 6 ( ) / THE CIT(A)-VIII, AHMEDABAD 5. 7 8 &45 , 45. , 3 / DR, ITAT, AHMEDABAD 6. 8:; <* / GUARD FILE. / BY ORDER, '7 & //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD