Assistant Commissioner of Income Tax,Chandrapur Circle,Chandrapur, Chandrapur V. The Chandrapur Dist.Central Co.Op.Bank, Chandrapur

ITA 86/NAG/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1914 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 8 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-02-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 02-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR MILLIAND BHUSARI
• Keywords: Depreciation; Cost of acquisition; Bad and doubtful debts; Revised return
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR E-BENCH, NAGPUR (THROUGH VIDEO CONFERENCE AT MUMBAI) . . , . / , . . BEFORE SHRI R.K. GUPTA, JUDICIAL MEMBER /AND SHRI RAJENDRA, ACCOUNTANT MEMBER . / ITA NO. 94/NAG/2012 / ASSESSMENT YEAR 2008-09 ASST. COMMISSIONER OF INCOME TAX, CIRCLE CHANDRAPUR, AAYAKAR BHAVAN, NEAR RAILWAY STATION, CHANDRAPUR. VS. THE CHANDRAPUR DISTRICT CENTRAL CO-OPERATIVE BANK LTD., CIVIL LINES, CHANDRAPUR. PAN: AAAJC 0023 F . / ITA NO. 86/NAG/2011 / ASSESSMENT YEAR 2007-08 ASST. COMMISSIONER OF INCOME TAX, CHANDRAPUR CIRCLE, RAMAVTAR BUILDING, CIVIL LINES, CHANDRAPUR. VS. THE CHANDRAPUR DISTRICT CENTRAL CO-OPERATIVE BANK LTD., CIVIL LINES, CHANDRAPUR. PAN: AAAJC 0023 F ( / APPELLANT ) ( / RESPONDENT ) REVENUE BY : DR. MILLIAND BHUSARI ASSESSEE BY : SHRI K.P. DEWANI ! '#$ / DATE OF HEARING : 29-01-2013 %& ! '#$ / DATE OF PRONOUNCEMENT : 01-02-2013 '( / O R D E R PER RAJENDRA, AM FOLLOWING GROUNDS OF APPEAL HAVE BEEN FILED BY THE ASSESSING OFFICER (AO) AGAINST THE ORDER DT. 11-11-2011 OF CIT(A)-II , NAG PUR. ITA NO. 94/NAG/2012 - AY.2008-09 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE CIT(A) HAS ERR ED IN HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR AMORTIZATION OF RS. 82 ,15,000/-. ITA NO. 86/NAG/2011 ITA NO. 94/NAG/2012 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E CIT(A) HAS ERRED IN ALLOWING THE CLAIM OF PROVISION OF RS. 69,69,000/- TOWARDS SUB S TANDARD ASSETS CLAIMED BY THE ASSESSEE AS PROVISION FOR BAD AND DOUBTFUL DEBTS. 3. ANY OTHER GROUNDS THAT MAY BE RAISED AT THE TIME OF HEARING. 2. ASSESSEE-BANK, ENGAGED IN THE BUSINESS OF BANKING AND FINANCE, FILED ITS REVISED RETURN OF INCOME ON 30-09-2009 DECLARING IN COME AT RS. NIL. VIDE HIS ORDER DT. 30-12-2010, ASSESSING OFFICER (AO) DETERMINED T HE INCOME OF THE ASSESSEE AT RS. 4.83 CRORES U/S. 143(3) OF THE INCOME TAX ACT, 1961 (ACT). 3. DURING THE ASSESSMENT PROCEEDINGS, AO FOUND THAT T HE ASSESSEE HAD MADE INVESTMENT IN GOVERNMENT SECURITIES AT PREMIUM PRIC E AT RS. 85,36,60,000/- HAVING FACE VALUE RS. 75,00,00,000/- DURING THE FINANCIAL YEAR 2003-04 AND 2004-05, THAT THE PREMIUM PAID OF RS. 10,36,60,000/- OF THESE INVESTM ENTS WAS AMORTIZED TILL YEARS UP TO MATURITY OF THE INVESTMENT, THAT THE ASSESSEE HA D CLAIMED AMORTIZED DEPRECIATION ON THESE INVESTMENT AT RS. 82,15,000/-, THAT THE ASSES SEE HAS DEBITED ABOVE AMORTISED AMOUNT TO THE PROFIT & LOSS A/C AND CLAIMED IN THE RETURN. AFTER SEEKING CLARIFICATION FROM THE ASSESSEE ABOUT AMORTISED AMOUNT, AO HELD T HAT DEPRECIATION AMOUNTING TO RS. 82.15 LAKHS WAS NOT ALLOWABLE AS PER THE PROVIS IONS OF THE ACT. 4. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPE LLATE AUTHORITY (FAA). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE A ND THE ASSESSMENT ORDER, HE HELD THAT THE GUIDELINES OF THE BANK REGULATOR, RESERVE BANK OF INDIA (RBI) WERE RELEVANT IN THIS CONTEXT, THAT AS PER THE RBI GUIDELINES (DT . 16 TH OCTOBER, 2000), THE INVESTMENT PORTFOLIOS OF THE BANKS WERE REQUIRED TO BE CLASSIF IED UNDER THREE CATEGORIES VIZ. HELD TO MATURITY (HTM), HELD FOR TRADING (HFT) AND AVAIL ABLE FOR SALE (AFS), THAT INVESTMENTS CLASSIFIED UNDER HTM CATEGORY WERE NOT TO BE TREATED AS MARKED TO MARKET AND WERE TO BE CARRIED AT ACQUISITION COST UNLESS THESE WERE MORE THAN THE FACE VALUE, THAT IN SUCH CASES, THAT PREMIUM SHOULD BE AMORTISED OVER THE PERIOD REMAINING TO MATURITY, THAT THE CASES OF HFT AND AF S SECURITIES FORMING STOCK-IN- TRADE OF THE BANK THE DEPRECIATION/APPRECIATION WAS TO BE AGGREGATED SCRIP-WISE AND ONLY NET DEPRECIATION WAS REQUIRED TO BE PROVIDED F OR IN THE ACCOUNTS. FAA ALSO REFERRED TO INSTRUCTION NO. 17 OF 2008 DT. 26-11-20 08 IN THIS REGARD. FINALLY, FAA HELD THAT CLAIM OF THE ASSESSEE WAS ALLOWABLE. ORD ER PASSED BY HIS PREDECESSOR FOR THE AY 2007-08 WAS ALSO RELIED UPON BY HIM WHERE SAME R ELIEF WAS GRANTED TO THE ASSESSEE. 5. BEFORE US, DEPARTMENTAL REPRESENTATIVE (DR) SUPPORT ED THE ORDER OF THE AO, WHEREAS AUTHORISED REPRESENTATIVE (AR) RELIED UPON THE ORDER OF THE FAA. HE ALSO REFERRED TO PAGE NO. 17 OF THE PAPER BOOK (PB) IN T HIS REGARD. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL BEFORE US. WE FIND THAT CBDT VIDE ITS CIRCULAR NO.17 DT. 26-11-20 08 (PARA VII) HAS DEALT THE ISSUE OF HTM (HELD TO MATURITY) CATEGORY SECURITIES IN THE F OLLOWING MANNER: ITA NO. 86/NAG/2011 ITA NO. 94/NAG/2012 3 AS PER RBI GUIDELINES DATED 16 TH OCTOBER, 2000, THE INVESTMENT PORTFOLIO OF THE BAN K IS REQUIRED TO BE CLASSIFIED UNDER THREE CATEGORIES VIZ. HELD TO MATURITY (HTM), HELD FOR TRADING (HFT) AND AVAILABLE FOR SALE (AFS). IN VESTMENTS CLASSIFIED UNDER HTM CATEGORY NEED NOT BE MARKED TO MARKET AND RE CARRIE D AT ACQUISITION COST UNLESS THESE ARE MORE THAN THE FACE VALUE, IN WHICH CASE THE PRE MIUM SHOULD BE AMORTIZED OVER THE PERIOD REMAINING TO MATURITY. IN THE CASE OF H FT AND AFS SECURITIES FORMING STOCK IN TRADE OF THE BANK, THE DEPRECIATION/APPREC IATION IS TO BE AGGREGATED SCRIP WISE AND ONLY NET DEPRECIATION, IF ANY, IS REQUIRED TO BE PROVIDED FOR IN THE ACCOUNTS. THE LATEST GUIDELINES OF THE RBI MAY BE REFERRED TO FOR ALLOWING ANY SUCH CLAIMS. FROM THE ABOVE CIRCULAR IT IS CLEAR THAT THE RBI HA S ALLOWED THE ASSESSEE TO AMORTISE THE SECURITIES OF HTM CATEGORY. IN THESE CIRCUMSTANCES, UPHOLDING THE ORDER OF THE FAA, WE DECIDE GROUND OF APPEAL NO.1AGAINST THE AO. 7. NEXT GROUND OF APPEAL IS ABOUT CLAIM OF DEDUCTION A MOUNTING TO RS. 69.69 LAKHS MADE U/S. 36(1)(VIIA) OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS, AO FOUND THAT TH E ASSESSING OFFICER HAS ADDED AN AMOUNT OF RS. 69,69,000/- TOWARDS PROVISI ON FOR STANDARD ASSETS. AS PER THE BALANCE SHEET AS ON 31-03-2008, THE TOTAL VALUE OF STANDARD ASSETS PROVISION WAS RS. 1,50,84,000/- OUT OF WHICH RS. 81,15,000/- WAS RELATABLE TO AY 2007-08 AND THE BALANCE OF RS. 69,69,000/- WAS RELATABLE TO AY 2008-09. HE HELD THAT RBI GUIDE LINES IN THIS REGARD (CREATING A PROVISION FOR STAN DARD ASSETS) WERE NOT BINDING IN ASSESSMENT PROCEEDINGS, THAT IT WAS CONTINGENT LIAB ILITY AND COULD NOT CONSTITUTE A DEDUCTIBLE EXPENDITURE FOR THE PURPOSE OF ACT. IN T HE APPELLATE PROCEEDINGS, FAA DELETED THE ADDITION ON THE GROUND THAT THERE WAS N O NEED FOR DISALLOWANCE ON THE BASIS OF AN ENTRY IN THE BALANCE SHEET, THAT AMOUNT -IN-QUESTION WAS NOT DEBITED TO P&L A/C. 8. BEFORE US, DR AND AR RELIED UPON THE ORDERS OF THE AO AND THE FAA RESPECTIVELY. AFTER CONSIDERING THE MATERIAL AVAIL ABLE, WE ARE OF THE OPINION THAT ORDER OF THE FAA IS AS PER THE PROVISIONS OF THE ACT AND PRINCIPLE OF ACCOUNTANCY. WHEN THE ASSESSEE HAD NOT DEBIT AN ITEM TO P&L A/C, JUST IFICATION FOR DISALLOWING THE SAME DOES NOT ARISE. 9. WE HAVE GONE THROUGH THE BALANCE SHEET OF THE ASSE SSEE AT PAGE NO. 4 OF PAPER BOOK. THE SAID BALANCE SHEET STRENGTHENS THE FINDING GIVEN BY THE FAA. THEREFORE, GROUND OF APPEAL NO.2 IS ALSO DECIDED AG AINST THE AO. AS A RESULT, APPEAL FILED BY THE AO STAND DISMISSE D. ITA NO. 86/NAG/2011 ITA NO. 94/NAG/2012 4 ITA NO. 86/NAG/2011 - AY.2007-08 10. SOLITARY GROUND OF APPEAL FILED BY THE AO AGAINST T HE ORDER DT.22-02-2011 OF THE CIT(A)-II, NAGPUR READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN HOLDING THAT THE ASSESSEE SOCIETY IS ELIGIBLE FO R AMORTIZATION OF PREMIUM OF RS. 82.17 LAKHS. 11. THE ISSUE OF AMORTISATION OF PREMIUM IN THE APPEAL IS SAME AS THAT OF APPEAL FILED BY HIM FOR THE AY 2008-09 (GROUND NO.1). WE HAVE ALREADY DECIDED THE ISSUE AGAINST THE ASSESSEE IN OUR ORDER AT PARA NO. 5. F OLLOWING THE SAME, WE DISMISS THE APPEAL FILED BY THE AO. AS A RESULT, APPEALS FILED BY THE AO FOR BOTH THE A YS I.E., 2007-08 & 2008-09 STAND DISMISSED. ORDER PRONOUNCED BY E-BENCH AT MUMBAI ON THIS 1 ST DAY OF FEBRUARY, 2013 )* +,' - *-. / 1 ST FEBRUARY, 2013 & '( %&0' 1 . SD/- SD/- ( . . / R.K. GUPTA ) ( / RAJENDRA ) ', / JUDICIAL MEMBER $ ', / ACCOUNTANT MEMBER )* MUMBAI, 1' DATE: 1 ST FEBRUARY, 2013 TNMM COPY TO: 1. APPELLANT 2. RESPONDENT 3. THE CONCERNED CIT (A) 4. THE CONCERNED CIT 5. DR, ITAT, NAGPUR 6. GUARD FILE 0' ' //TRUE COPY// BY ORDER, ASST. REGISTRAR, ITAT