Deputy Commissioner of Income-tax, Pune V. M/s. Janata Sahakari Bank Ltd.,Seco Tools India Pvt. Ltd., Pune

ITA 814/PUN/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 4075 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 09-04-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 05-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS NANDITHA KANCHAN
• Keywords: Depreciation; Set aside
• Section: 143(3)

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.814/PUN/2017 / ASSESSMENT YEAR : 2012-13 THE DY.COMMISSIONER OF INCOME TAX, CIRCLE 6, PUNE. . / APPELLANT. V/S M/S. JANATA SAHAKARI BANK LTD., 1444, BAJIRAO ROAD, SHUKRAWAR PETH, PUNE 411 002. PAN : AAAJJ0073G. . / RESPONDENT ASSESSEE BY : SHRI NIKHIL PATHAK. REVENUE BY : MRS. NANDITHA KANCHAN. / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE REVENUE IS EMANATING OUT OF THE OR DER OF COMMISSIONER OF INCOME TAX (A) 4, PUNE DATED 25.11.2016 FOR THE ASSESSMENT YEAR 2012-13. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- ASSESSEE IS A CO-OPERATIVE BANK STATED TO BE ENGAGED IN BANKING BUSINESS. ASSESSEE ELECTRONICALLY FILED ITS RETURN OF INCOME FOR A.Y. 2012-13 ON 29.09.2012 DECLARING TOTAL INCOME AT RS. NIL. THE CASE WAS TAKEN UP FOR SCRUTINY AND THEREAFTER ASSESSMENT WA S FRAMED U/S / DATE OF HEARING : 16.07.2019 / DATE OF PRONOUNCEMENT: 19.08.2019 2 143(3) OF THE ACT VIDE ORDER DT.30.03.2015 AND THE TOTAL INCOME WAS DETERMINED AT RS.32,07,70,037/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORD ER DT.25.11.2016 (IN APPEAL NO.PN/CIT(A)-4/140/2015-16) ALLOWE D THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT (A), REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS. 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, WAS THE CIT(A) JUSTIFIED IN DELETING THE DISALLOWANCE O F RS.6,84,77,788/- BEING DEPRECIATION ON GOVERNMENT SECURITIES OF HELD TILL MATURITY (HTM) CATEGORY, WHEN HTM SECURITIES ARE CAPITAL IN NATURE ? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, WAS THE CIT(A) JUSTIFIED IN DELETING THE DISALLOWANCE O F RS.5,99,211/- BEING LOSS ON SALE OF HTM SECURITIES WHICH ARE CAPITAL IN NATURE ? 3. FOR THIS AND SUCH OTHER REASONS AS MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE CIT(A) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. ALL THE GROUNDS BEING INTER-CONNECTED ARE CONSIDERED TOGETH ER. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOT ICED THAT IN THE PROFIT AND LOSS ACCOUNT ASSESSEE HAD CLAIMED RS.6,8 4,77,788/- AS DEPRECIATION AGAINST INVESTMENT HELD TILL MATURITY (HTM). AO WAS OF THE VIEW THAT THE INVESTMENTS HELD AS HTM ARE CAPITAL INV ESTMENTS AND IT CANNOT BE TREATED AS STOCK-IN-TRADE AND THEREFORE IT CANNOT BE VALUED BY ADOPTING THE COST OR THE MARKET VALUE WHICHEVER IS LE SS. THE SUBMISSIONS OF THE ASSESSEE ABOUT THE VALUATION BEING MAD E AS PER THE GUIDELINES ISSUED BY THE RESERVE BANK OF INDIA (RBI) WERE NOT FOUND ACCEPTABLE TO THE AO. AO THEREFORE HELD THAT THE CLAIM O F DEPRECIATION OF RS.6,84,77,788/- WAS NOT ALLOWABLE AND ACCORDINGLY DISALLO WED THE CLAIM. 3 5. AO ALSO NOTICED THAT ASSESSEE HAD CLAIMED RS.5,99,211/ - AS BEING LOSS ON ACCOUNT OF SALE OF HTM SECURITIES. AO WAS OF THE VIEW THAT THE CLAIM WAS NOT ALLOWABLE AS IT WAS A CAPITAL LOSS. H E ACCORDINGLY MADE ITS ADDITION. 6. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE M ATTER BEFORE LD.CIT(A), WHO ALLOWED THE CLAIM OF ASSESSEE BY OBSERVING AS UNDER : 5.3. DECISION :- I HAVE CAREFULLY CONSIDERED THE OBSERVATIONS OF THE AO. IN THE ASSESSMENT ORDER AS WELL AS THE CONT ENTIONS RAISED BY THE AR. OF THE APPELLANT IN THE WRITTEN SUBMISSION. ADVERTING TO' THE DECISION OF THE HON'BLE ITAT VIDE ITA NO.522 & 523/PN/2013 AND ITA NO.1872/PN/2013 DATED 25.02.2015 IN THE APPELLANT'S OWN CASE FOR AYRS. 2007-08, 2009-10 & 2010-11, THE HON'BLE ITAT HAS HELD THAT THE CHANGE IN METHOD OF ACCOUNTING ADOPTED BY THE APPELLANT FOR VALUING ITS HTM SECURI TIES AT LOWER OF COST OR MARKET PRICE IS A BONAFIDE CHANGE AND THE A SSESSEE' IS ENTITLED TO THE CLAIM OF DEPRECIATION ON VALUE OF H TM SECURITIES. AS THE LOSS ARISING ON ACCOUNT OF AFS AND HFT SECURITIES HAVE ALREADY BEEN ACCEPTED, THE LD.AO WAS DIRECTED TO AL LOW THE CLAIM ARISING ON ACCOUNT OF DEPRECIATION ON VALUE OF HTM SECURITIES. HENCE, IN VIEW OF THE HON'BLE ITAT'S ORDER (SUPRA), THE AO IS DIRECTED TO CANCEL THE ADDITION MADE ON ACCOUNT OF DEPRECIATION CLAIMED ON GOVERNMENT SECURITIES (HTM) OF RS.6,84,77,788/-. LD.CIT(A) FURTHER DIRECTED THE DELETION OF ADDITION OF RS.5,92 ,211/- IN RESPECT OF LOSS ON SALE OF HTM SECURITIES. AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW BEFORE US. 7. BEFORE US, LD. D.R. SUPPORTED THE ORDER OF LOWER AUTHOR ITIES. LD.A.R. ON THE OTHER HAND, REITERATED THE SUBMISSIONS MADE BEFORE LOWER AUTHORITIES AND SUBMITTED THAT IDENTICAL ISSUE AROSE IN ASSESSEES OWN CASE IN A.Y. 2005-06 IN ITA NO.21/PN/2014 ORDER DT.25.02.2015 WHICH HAS BEEN RELIED UPON BY LD.CIT(A). HE FU RTHER SUBMITTED THAT HONBLE BOMBAY HIGH COURT IN THE CASE OF PCIT VS. BANK OF MAHARASHTRA REPORTED IN (2018) 97 TAXMANN.COM 58 1 ON 4 IDENTICAL FACTS HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSES SEE BY DISMISSING THE APPEAL OF REVENUE. HE PLACED ON RECORD TH E COPY OF THE AFORESAID ORDER. HE THUS SUPPORTED THE ORDER OF LD.CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPEC T TO ALLOWING THE LOSS OF VALUATION ON HTM SECURITIES AND LOSS ON SALE OF HTM SECURITIES . WE FIND THAT LD.CIT(A) AFTER CONSIDERING VARIOUS DECISIONS CITE D IN THE ORDER AND THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.21/PN/2014 FOR A.Y. 2005-06 HAS HELD THAT THE CLAIM OF DEPRECIATION ON VALUATION OF HTM SECURITIES AND LOSS ON SA LE OF HTM SECURITIES ARE ALLOWABLE IN ASSESSEES HANDS. BEFORE US, R EVENUE HAS NOT POINTED OUT ANY DISTINGUISHING FEATURE IN THE FACTS OF T HE PRESENT CASE AND TO THAT OF ASSESSEES OWN CASE IN A.Y. 2005-06 IN ITA NO.21/PN/2014 (SUPRA) NOR HAS PLACED ANY MATERIAL ON RECO RD TO DEMONSTRATE THAT THE DECISION OF PUNE TRIBUNAL IN ASSESSE ES OWN CASE IN A.Y. 2005-06 WHICH HAS BEEN RELIED UPON BY LD.CIT(A) H AS BEEN SET ASIDE / OVERTURNED OR STAYED BY THE HIGHER JUDICIAL FORUM. WE FURTHER FIND THAT HONBLE BOMBAY HIGH COURT IN THE CASE O F PCIT VS. BANK OF MAHARASHTRA REPORTED IN (2018) 97 TAXMANN.COM 58 1 (BOM) HAS HELD THAT THE SECURITIES KEPT BY ASSESSEE ON THE B ASIS OF HELD TO MATURITY (HTM) COULD BE VALUED BY USING THE METHOD OF COS T OR MARKET PRICE WHICHEVER IS LESS. IN VIEW OF THE AFORESAID FACT S, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD.CIT(A) AND THUS THE GROUNDS OF REVENUE ARE DISMISSED. 5 9. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED ON 19 TH DAY OF AUGUST, 2019. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; DATED : 19 TH AUGUST, 2019. YAMINI #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A)-4, PUNE. PR. CIT-3, PUNE. '#$ %%&',) &', / DR, ITAT, B PUNE; $*+,/ GUARD FILE. / BY ORDER // TRUE COPY // -./%0&1 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.