Bharati Sahakari Bank Ltd., Pune V. Dy. CIT, Circle 1(1), Pune

ITA 898/PUN/2013

• Counselvise Citation: 89824514 RSA 2013
• Duration Of Justice: 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 23-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L PATHADE
• Keywords: Capital asset; Depreciation; Revenue expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE BEFORE: SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 898 / P N/ 20 13 ASSESSMENT YEAR : 2009 - 10 BHARATI SAHAKARI BANK LTD., BHARATI VIDYAPEETH BHAVAN, LBS ROAD, NAVI PETH, PUNE - 411030 VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE - 1(1), PMT BUILDING, SWARGATE, PUNE (APPELLANT) (RESPONDENT) PAN NO. AAATB4583F APPELLANT BY: SHRI MAHAVIR JAIN RESPONDENT BY: SHRI P.L. PATHADE DATE OF HEARING : 26 - 11 - 2013 DATE OF PRONOUNCEMENT : 29 - 11 - 2013 ORDER P ER R.S. PADVEKAR , JM : - THIS APPEAL IS FILED BY THE ASSESS CHALLENGING THE IMPUGNED ORDER OF THE LD. CIT(A) - I, PUNE DATED 01 - 02 - 2013 FOR THE A.Y. 2009 - 10. THE ASSESSEE HAS TAKEN M ULTIPLE GROUNDS BUT THE SOLITARY ISSUE FOR CONSIDERATION IS WHETHER THE CIT(A) ERRED IN CONFIRMING THAT THE AMORTIZATION OF THE PREMIUM PAID IN EXCESS OF FACE VALUE OF THE GOVERNMENT SECURITIES OF THE CATEGORY HELD TO MATURITY (HTM) IS CAPITAL IN NATURE. 2. THE FACTS WHICH ARE REVEALED FROM THE RECORD AS UNDER. THE ASSESSEE IS A CO - OPERATIVE SOCIETY, REGISTERED UNDER THE PROVISIONS OF CO - OPERATIVE SOCIETIES ACT, 1960 AND ENGAGED IN CARRYING ON THE BUSINESS OF BANKING. THE ASSESSEE IS A SCHEDULED MU LTI - STATE CO - OPERATIVE BANK. THE ASSESSEE FILED THE RETURN OF INCOME FOR THE A.Y. 2009 - 10 DECLARING TOTAL INCOME OF RS.7,10,32,690/ - . THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY AND SCRUTINY HAS BEEN COMPLETED U/S. 143(3) OF THE INCOME - TAX ACT. AS NO TED BY THE ASSESSING OFFICER , THE ASSESSEE HAS DEBITED AN AMOUNT OF RS. 26,91,750/ - IN THE P&L A CCOUNT TOWARDS AMORTIZATION OF 2 ITA NO. 898/PN/2013, BHARATI SAHAKARI BANK LTD., PUNE PREMIUM ON GOVERNMENT SECURITIES FOR F.Y. 2008 - 09 (A.Y. 2009 - 10). HE HAS NOTED THAT THE ASSESSEE HAS PURCHASED CERTAIN GOVERNMENT SECURITIES AND CLASSIFIED SAME IN THE CATEGORY OF HELD TO MATURITY (HTM). THE ASSESSING OFFICER DISALLOWED THE CLAIM IN RESPECT OF AMORTIZATION OF PREMIUM AS REVENUE EXPENDITURE BY HOLDING THAT SECURITIES HELD UNDER THE HTM CATEGORY ARE CAPITAL ASSET A ND SAME CANNOT BE EQUATED WITH THE SECURITIES HELD UNDER THE AVAILABLE FOR SALE (AFS) AND HELD FOR TRADING (HFT) WHICH ARE IN THE NATURE OF STOCK - IN - TRADE. 3. THE ASSESSING OFFICER, THEREFORE, MADE THE DISALLOWANCE RS. 26,91,750/ - AND MADE ADDITION T O THE TOTAL INCOME. THE ASSESSE CHALLENGED THE SAID ADDITION BEFORE THE LD. CIT(A) AND LD. CIT(A) CONFIRMED THE ADDITION . NOW THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE PARTIES. WE FIND THAT THE ISSUE STAND COVERED IN FAVOUR OF THE ASSES SEE, THE DECISION IN THE CASE OF LATUR URBAN CO - OPERATIVE BANK LTD. VS. DCIT, CIRCLE - 3, ITA NOS. 778 & 792/PN/2011 DATED 31 - 08 - 2012 . IN THE SAID CASE THE TRIBUNAL HAS HELD THAT ALL THE SECURITIES HELD BY THE BANK FROM PART OF THE STOCK - IN - TRADE IRRESPECTI VE OF CLASSIFICATION AND AS PER RBI GUIDELINES . THE OPERATIVE PART OF THE TRIBUNAL DECISION IS AS UNDER: 14. WE HAVE HEARD THE PARTIES. THE LD . COUNSEL PLACED HIS HEAVY RELIANCE ON THE DECISION OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. B ANK 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 LORDSHIP WAS WHETHER THE ASSESSEE WAS ENTITLED FOR DEDUCTION ON ACCOUNT OF DEPRECIATION IN THE VALUE OF INVESTMENTS. THE ME THOD OF VALUATION FOLLOWED BY THE ASSESSEE BANK WAS TO VALUE INVESTMENTS AT COST OR MARKET VALUE WHICHEVER WAS LOWER. THE ASSESSEE HAD CLAIMED THE DEPRECIATION TO THE TUNE OF RS. 11,82,35,007/ - AND THE SAID DEPRECIATION WAS CLAIMED AS A DEDUCTION WHICH WA S DISALLOWED BY THE A.O, BUT THE ASSESSEE BANK SUCCEEDED BEFORE THE CIT(A). THE TRIBUNAL CONFIRMED THE ORDER OF THE CIT(A). THE REVENUE CARRIED THE ISSUE BEFORE THE HONBLE HIGH COURT. THE CORE ISSUE WAS THE METHOD OF VALUATION ADOPTED BY THE ASSESSEE B ANK FOR VALUING THE STOCK OF THE SECURITIES. THE HONBLE HIGH COURT FOLLOWED THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF UNITED COMMERCIAL BANK (SUPRA). 3 ITA NO. 898/PN/2013, BHARATI SAHAKARI BANK LTD., PUNE 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 THE LOSS ON THE SALE OF THE SECURITIES. MERELY BECAUSE THE SECURITIES 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 HERE THE DECISION OF THE HONBLE HIGH COURT OF KERALA IN THE CASE OF CIT VS. NEDUNGADI BANK LTD., 264 ITR 545. IN THE SAID CASE, THE HONBLE HIGH COURT HAS HELD THAT THE SECURITIES HELD BY THE BANK ARE IN THE NATURE OF STOCK - IN - TRADE. BOTH THE AUTHORITIES BELOW HAS MERELY GONE ON THE NOMENCLATURE OF THE HEAD UNDER WHICH THE SECURITIES ARE HELD. IN OUR CONSIDERED VIEW, NOMENCLATURE CANNOT BE DECISIVE FOR THE ASSESSEE BANK. WE, THEREFORE, HOLD THAT THE LOSS ON THE SALE OF THE SECURITIES IS REVENUE IN NATURE AND SAME IS ALLOWABLE. ACCORDINGLY, GROUND NO. 2 IS ALLOWED. 5. WE ALSO FIND T HAT THE ISSUE STAND COVERED IN FAVOUR OF THE ASSESSEE BY THE ITAT, PUNE IN THE CASE OF THE SANGLI BANK LTD. VS. ACIT, CIRCLE - 2, SANGLI BEING ITA NO. 846/PN/2006 ORDER DATED 30 - 05 - 2013. WE, ACCORDINGLY, REVERSE ORDER OF THE CIT(A) - I, PUNE AND ALLOW GROUND S TAKEN BY THE ASSESSEE. 6. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 29 - 11 - 20 1 3 SD/ - SD/ - ( R.K. PANDA ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER RK /PS PUNE , DATED : 29 TH NOVEMBER, 20 1 3 COPY TO 1 DEPARTMENT 2 ASSESSEE 3 THE CIT(A) , AURANGABAD 4 THE CIT, AURANGABAD 5 THE DR, ITAT, A BENCH, PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE