Assistant Commissioner of Income-tax, V. Shankarrao Mohite Patil Sahakari Bank Ltd., Solapur

ITA 934/PUN/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2837 (ITAT-PUNE)
• Duration Of Justice: 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 15-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DHEERAJ KUMAR JAIN
• Assessee Lawyers: SUNIL GANOO SHRI SUNIL GANOO
• Keywords: Capital asset; Business income; Question of law; Revenue expenditure; Capital expenditure
• Section: 143(3); 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA , A M . / ITA NO. 934 /PN/201 5 / ASSESSMENT YEAR : 20 1 1 - 1 2 THE INCOME TAX OFFICER, WARD 1(3) , PANDHARPUR . / APPELLANT VS. SHANKARRAO MOHITE PATIL SAHAKARI BANK LTD., A/P AKLUJ, TAL MALSHIRAS, DIST SOLAPUR 413101 . / RESPONDENT PAN: AAAAS1270P / APPELLANT BY : SHRI DHEERAJ KUMAR JAIN / RESPONDENT BY : SHRI SUNIL GANOO / RESPONDENT BY : SHRI SUNIL GANOO . / ITA NO. 615 /PN/201 5 / ASSESSMENT YEAR : 20 11 - 12 THE I NCOME TAX OFFICER, WARD 2 ( 4 ), SOLAPUR . / APPELLANT VS. SAMARTH SAHAKARI BANK LTD., FIRST FLOOR, ANTROLIKAR SHOPPING CENTRE, DATTA CHOWK, SOLAPUR 413007 . / RESPONDENT PAN: AAA J S1 39 0P / APPELLANT BY : SHRI DHEERAJ KUMAR JAIN / RESPONDENT BY : SHRI S.N. PURANIK ITA NO. 934 /PN/20 1 5 ITA NO.615/PN/2015 SHANKARRAO MOHITE PATIL SAH. BANK LTD. & ANR 2 / DATE OF HEARING : 0 3 . 0 2 .201 6 / DATE OF PRONOUNCEMENT: 10 . 0 2 .201 6 / ORDER PER SUSHMA CHOWLA, J M : BOTH THE APPEALS FILED BY REVENUE RELATING TO DIFFERENT ASSESSEES ARE AGAINST SEPARATE ORDER S OF CIT (A) - 7 , PUNE , DATED 24 . 0 3 .20 1 5 AND 10.02.2015 RELATING TO ASSESSMENT YEAR 20 1 1 - 1 2 AGAINST RESPECTIVE ORDER S PASSED UNDER SECTION 143(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . THE REVENUE IN ITA NO.934/PN/2015 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THE LEARNED COMMISSIONER INCOME - TAX (APPEALS) GROSSLY ERRED IN DELETING THE ADDITION ON ACCOUNT OF ACCRUED INTEREST ON NON PERFORMING ASSETS U/S 43D OF THE INCOM E - TAX ACT, 1961 OF RS .4 5,89,499/ - INSTEAD OF CONFIRMING THE SAME. 2. THE LEARNED COMMISSIONER OF I NCOME - TAX (APPEALS) HAS GROSSLY ERRED IN APPRECIATING THE FACT THAT PROVISIONS OF SECTION 43 D ARE ONLY APPLICABLE TO FINANCIAL INSTITUTIONS AND A SCHEDULED BANK. THE ASSESSEE BEING A NON - SCHEDULED BANK PROVISION OF SECTION 43 D WOULD NOT APPLY. 3. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS GROSSLY ERRED IN INTERPRETING THE PROVISIONS OF SECTION 145 OF THE INCOME TAX ACT, 1961 UNDER WHICH THE ASSESS EE IS NOT ALLOWED TO USE THE MIXED OR HYBRID SYSTEM OF ACCOUNTING. 4. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS GROSSLY ERRED IN APPRECIATING THE DECISION OF SUPREME COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LIMITED VS . JCIT 320 ITR 577 (SC) WHERE THE APEX COURT HAS HELD THAT RBI PROVISIONS ARE DISCLOSURE NORM AND CANNOT OVERRIDE PROVISIONS OF INCOME TAX ACT, 1961 AS BOTH OPERATE IN DIFFERENT FIELDS. 5. THE LEARNED CO M M I SSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN FACTS THAT THE ASSESSEE DO ES NOT SATISFY THE TWO CONDITIONS IN THE CB D T'S CIRCULAR NO.F - 201/81/84 ITA - IL DATED 09/10/1984 AND HENCE CANNOT AVAIL THE BENEFITS OF THE CIRCULAR. THE APPELLANT HEREIN REPRODUCES THE TWO CONDITIONS OF THE CIRCULAR (A) THE ASSESSEE SHOULD BE BANKING COMP ANY. (B) SUCH INTEREST SHOULD HAVE REMAINED UNCOVERED FOR CONSECUTIVELY FOR THREE PREVIOUS YEARS. ITA NO. 934 /PN/20 1 5 ITA NO.615/PN/2015 SHANKARRAO MOHITE PATIL SAH. BANK LTD. & ANR 3 6. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN DELETING THE ADDITION OF RS .4 ,60,592/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF AMORTIZATION PREMIUM ON GOVERNMENT SECURITIES WITHOUT APPRECIATING THAT THE SECURITIES HELD UNDER 'HELD TO MATURITY' (HTM) ARE IN THE NATURE OF CAPITAL ASSETS AND FOR THE PURPOSE OF INCOME TAX, THE SECURITIES HELD UNDER THE CATEGORY 'HELD TO MATURITY' HAS TO BE VALUED AT COST ONLY AND NO PART THEREOF CAN BE CLAIMED AS REVENUE EXPENDITURE IN COMPUTING THE TOTAL INCOME. 7. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS), SHOULD HAVE APPRECIATED THE FACT THAT THE PREMIUM PAID ON GOVERNMENT SECURITIES WAS AMORTIZED IN T HE BOOKS OF ACCOUNT CLEARLY SHOWS THE SECURITIES WERE HELD AS HMT SECURITIES BY THE A SSESSEE BANK ON CAPITAL ACCOUNT. THEREFORE, THE SAID SECURITIES ARE PERMANENT SECURITIES IN THE NATURE OF CAPITAL ASSETS AND THE SAME CANNOT BE SEGREGATED FROM THE COST AN D CLAIMED AS DEDUCTION. 8. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) SHOULD HAVE APPRECIATED THAT THE CB D T INSTRUCTION NO.17/2008 WAS ISSUED PRIOR TO THE DECISION OF THE APEX COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LIMITED VS. JCIT 320 ITR 577 (SC) WHEREIN IT IS HELD THAT THE RBI GUIDELINES OR PRUDENTIAL NORMS ISSUED BY RBI ARE NOT INTENDED TO REGULATE INCOME TAX LAWS. THERE IS NO PROVISION UNDER THE I. T ACT TO ALLOW AMORTIZATION OF PREMIUM AS DEDUCTION EITHER IN THE YEAR OF ACQUISITION OF HTM S ECURITIES OR COVER THE PERIOD OF MATURITY ON DEFERRED BASIS. 9. FOR THE FACTS AND SUCH OTHER REASONS AS MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) - ILL, HEARING, THE ORDER OF THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) - ILL, PUNE MAY BE VACATED AND THAT OF THE ASSESSING OFFI CER BE RESTORED. 10. THE APPELLANT CRAVES LEAVES TO ADD, AMEND, ALTER OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE HONBLE TRIBUNAL. 3. THE ISSUE S ARISING IN BOTH THE APPEALS ARE IDENTICAL. HOWEVER, WE PROCEED TO ADJUDICATE THE ISSUE S BY MAKING REFERENCE TO THE FACTS IN ITA NO. 934 /PN/201 5 . 4 . THE ISSUE IN GROUNDS OF APPEAL NO.1 TO 5 RAISED BY THE REVENUE IS IN RELATION TO THE ORDER OF CIT(A) IN DELETING THE ADDITION MADE ON ACCOUNT OF ACCRUED INTERES T ON NON - PERFORMING ASSETS (NPAS) . ITA NO. 934 /PN/20 1 5 ITA NO.615/PN/2015 SHANKARRAO MOHITE PATIL SAH. BANK LTD. & ANR 4 5 . BRIEFLY, IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE IS A COOPERATIVE BANK ENGAGED IN THE BUSINESS OF BANKING. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAD NOT CRED ITED THE INTEREST RECEIVABLE OR ACCRUED ON NON - PERFORMING ASSETS (REFERRED TO AS NPAS) TO ITS PROFIT & LOSS ACCOUNT FOR THE CAPTIONED ASSESSMENT YEAR. THE CLAIM OF THE ASSESSEE IN THIS REGARD WAS THAT IN VIEW OF RBI GUIDELINES, THE SAID INTEREST INCOME ON NPAS WAS TO BE RECOGNIZED, BUT NOT TO BE OFFERED TO TAX. HOWEVER, THE ASSESSING OFFICER WAS OF THE VIEW THAT WHERE THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, THE INTEREST ACCRUED ON NPAS IS TO BE ADDED IN THE HANDS OF ASSESSEE AND ADDITI ON TO THAT EXTENT WAS MADE IN THE HANDS OF ASSESSEE. 6 . THE CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER, AGAINST WHICH THE REVENUE IS IN APPEAL. 7 . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT THE IS SUE RAISED IN THE PRESENT APPEAL IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE IN VIEW OF THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. (1) DEOGIRI NAGARI SAHAKARI BANK LTD. (INCOME TAX APPEAL NO.53 OF 2014), (2) PEOPLES CO - OPERATIVE BANK LTD. (INCOME TAX APPEAL NO.54 OF 2014), (3) NANDED DISTRICT CENTRAL CO - OP. BANK LTD. (INCOME TAX APPEAL NO.57 AND 58 OF 2014) AND (4) VASANTADADA NAGARI SAHAKARI BANK LTD. (INCOME TAX APPEAL NO.68 OF 2014) REPORTED IN (2015) 379 ITR 24 (BOM). 8 . WE FIND THAT SIMILAR ISSUE AS BEFORE US AROSE IN KOLHAPUR MAHILA SAHAKARI BANK LTD. VS. ITO IN ITA NO.01/PN/2013, RELATING TO ASSESSMENT YEAR 2009 - 10, VIDE ORDER DATED 29.01.2014. THE TRIBUNAL IN TURN FOLLOWING THE RATIO ITA NO. 934 /PN/20 1 5 ITA NO.615/PN/2015 SHANKARRAO MOHITE PATIL SAH. BANK LTD. & ANR 5 LAID DOWN BY THE PUNE BENCH OF TRIBUNAL IN ACIT VS. OSMANABAD JANTA SAHAKARI BANK LTD. IN ITA NO.795/PN/2011, ORDER DATED 31.08.2012, HELD AS UNDER: - 2. THE ASSESSEE IS A CO - OPERATIVE BANK ENGAGED IN THE BUSINESS OF ACCEPTING DEPOSITS FROM MEMBERS AND GIVING LOANS TO MEMBERS. IT HAS FILED ITS RE TURN OF INCOME ON 11.09.2009 FOR THE YEAR UNDER CONSIDERATION DECLARING TOTAL INCOME AT 14,57,840/ - . IN THE SCRUTINY ASSESSMENT, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD NOT CREDITED INTEREST RECEIVABLE OR ACCRUED ON NON - PERFORMING ASSETS (HER EINAFTER REFERRED TO AS NPA) TO ITS PROFIT AND LOSS ACCOUNT FOR FINANCIAL YEAR 2008 - 09. THE ASSESSING OFFICER AFTER REJECTING THE VARIOUS CONTENTIONS OF THE ASSESSEE HAS HELD THAT THE RBI GUIDELINES ARE NOT INTENDED TO REGULATE THE INCOME TAX LAW AND THE ASSESSEE WAS LIABLE TO BE ASSESSED ON ACCRUAL BASIS U/S.5 OF I.T. ACT FOR THE REASONS (I) BENEFITS EXTENDED TO SCHEDULE BANK, PUBLIC FINANCIAL INSTITUTIONS, PUBLIC COMPANIES FOR THE PURPOSE OF SECTION 43D WERE NOT EXTENDED TO A CO - OPERATIVE BANK AND (II) T HE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND NOT CASH SYSTEM. ULTIMATELY THE ASSESSING OFFICER TAXED ON ACCRUED INTEREST OF 25,20,022/ - ADVANCE CLAIMED TO BE NPA ACCOUNT. THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY WHER EIN, FOLLOWING THE OSMANABAD JANTA SAHAKARI BANK LTD. IN ITA NO.795/PN/2011, THE CIT(A) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF REVENUE. 2.1 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND MATERI AL ON RECORD, WE FIND THAT IN OSMANABAD JANTA SAHAKARI BANK LTD. (SUPRA) THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE BY OBSERVING AS UNDER: 7. IN THE CASE BEFORE US, ADMITTEDLY, ASSESSEE HAS DIRECTLY TAKEN THE INTEREST TO THE BALANCE SHEET A ND IT IS NOT ROUTED THROUGH THE PROFIT & LOSS ACCOUNT. MOREOVER, THE ISSUE OF THE TAXABILITY OF THE INTEREST ON THE STICKY LOSSES/ADVANCES, IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE COORDINATE BENCHES IN THE CASE OF THE DURGA COOPERATIV E URBAN BANK LTD., VIJAYAWADA (SUPRA) AND KARNAVATI COOPERATIVE BANK LTD. (SUPRA). WE FIND NO REASON TO INTERFERE WITH THE REASONED ORDER OF THE LD. CIT(A) AND ACCORDINGLY THE SAME IS CONFIRMED. IN THE RESULT, THE REVENUES GROUND IS DISMISSED. THE ABO VE DECISION HAS BEEN FOLLOWED IN (I) ACIT, CIRCLE - 3, NANDED V/S BHAGYALAXMI MAHILA SAHAKAR BANK LTD. ITA NO.793/PN/2011, (II) ACIT, CIRCLE - 3 V/S SIDHESHWAR SAHAKARI BANK LTD. ITA NO.794/PN/2011, (III) ACIT (CENTRAL) V/S LATUR URBAN CO - OPERATIVE BANK LTD. I TA NO.792/PN/2011 AND (IV) ASST. CIT, CIRCLE - 1 V/S DEOGIRI NAGARI SAHAKARI BANK LTD. ITA NO.817 & 1114/PN/2011. 9 . THE HONBLE BOMBAY HIGH COURT IN CIT VS. M/S. DEOGIRI NAGARI SAHAKARI BANK LTD. IN INCOME TAX APPEAL NO.53 OF 2014 & ORS. HAS LAID DOWN THE PROPOSITION THAT THE INTEREST ACCRUED ON NPAS IS NOT TAXABLE IN THE HANDS OF ASSESSEE, IN VIEW OF THE GUIDELINES ISSUED BY THE RBI. ITA NO. 934 /PN/20 1 5 ITA NO.615/PN/2015 SHANKARRAO MOHITE PATIL SAH. BANK LTD. & ANR 6 10 . FOLLOWING THE SAME PARITY OF REASONING, WE HOLD THAT NO ADDITION IS WARRANTED ON ACCOUNT OF INTEREST ACCRUED ON NPAS . ACCORDINGLY, WE UPHOLD THE ORDER OF CIT(A) IN DELETING THE ADDITION MADE ON ACCOUNT OF INTEREST ACCRUED ON NPAS. THE GROUND OF APPEAL NO.1 RAISED BY THE REVENUE IS DISMISSED. 1 1 . THE ISSUE IN GROUNDS OF APPEAL NO.6 TO 8 RAISED BY THE REVENUE IS IN REL ATION TO THE DELETION OF ADDITION MADE ON ACCOUNT OF AMORTIZATION OF PREMIUM ON GOVERNMENT SECURITIES. 1 2 . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE ISSUE IS COVERED BY THE ORDER OF TRIBUNAL IN ACIT VS. SHRI GAJANAN NAGAR I SAHAKARI BANK LTD. IN ITA NO.695/PN/2013, RELATING TO ASSESSMENT YEAR 2009 - 10, ORDER DATED 29.11.2013 AND ALSO BY THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN CIT VS. M/S. GAJANAN NAGARI SAHAKARI BANK LTD. IN INCOME TAX APPEAL NO.39 OF 2014, DATED 07.01. 2015. 1 3 . WE FIND THAT SIMILAR ISSUE HAS BEEN DECIDED BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. HDFC BANK LTD. IN INCOME TAX APPEAL NO.330 OF 2012, DATED 23.07.2014 IN FAVOUR OF THE ASSESSEE. THE HONBLE BOMBAY HIGH COURT HAS HELD AS UNDER: - 4. WE DO NOT AGREE. IN THE CASE AT HAND, AS RECORDED BY THE ITAT, UNDISPUTEDLY THE ASSESSEES OWN FUNDS AND OTHER NON - INTEREST BEARING FUNDS WERE MORE THAN THE INVESTMENT IN THE TAX FREE SECURITIES. THE ITAT THEREFORE HELD THAT THERE WAS NO BASIS FOR DEEMING THAT THE ASSESSEE HAD USED THE BORROWED FUNDS FOR INVESTMENT IN TAX FREE SECURITIES. ON THIS FACTUAL ASPECT, THE ITAT DID NOT FIND ANY MERIT IN THE CONTENTION RAISED BY THE REVENUE AND THEREFORE, ACCORDINGLY ANSWERED THE QUESTION IN FAVOUR OF THE ASSESSEE. O N GOING THROUGH THE ORDER OF THE CIT(APPEALS) DATED 28 TH MARCH 2005 AS WELL AS THE IMPUGNED ORDER, WE DO NOT FIND THAT THE CIT(APPEALS) OR THE ITAT ERRED IN HOLDING IN FAVOUR OF THE ASSESSEE. IN THIS REGARD, THE SUBMISSION OF MR MISTRY, THE LEARNED SENIOR COUNSEL APPEARING ON BEHALF OF THE ASSESSEE, THAT THIS ITA NO. 934 /PN/20 1 5 ITA NO.615/PN/2015 SHANKARRAO MOHITE PATIL SAH. BANK LTD. & ANR 7 ISSUE IS SQUARELY COVERED BY A JUDGMENT OF THIS COURT IN THE CASE OF COMMISSIONER OF INCOME TAX V/S RELIANCE UTILITIES AND POWER LTD., REPORTED IN (2009) 313 ITR 340 (BOM) IS WELL FOUNDED. THE FACTS OF THAT CASE WERE THAT THE ASSESSEE VIZ. M/S RELIANCE UTILITIES AND POWER LTD. HAD INVESTED CERTAIN AMOUNTS IN RELIANCE GAS LTD. AND RELIANCE STRATEGIC INVESTMENTS LTD. IT WAS THE CASE OF THE ASSESSEE THAT THEY THEMSELVES WERE IN THE BUSINESS OF GENERATIO N OF POWER AND THEY HAD EARNED REGULAR BUSINESS INCOME THEREFROM. THE INVESTMENTS MADE BY THE ASSESSEE IN M/S RELIANCE GAS LTD. AND M/S RELIANCE STRATEGIC INVESTMENTS LTD. WERE DONE OUT OF THEIR OWN FUNDS AND WERE IN THE REGULAR COURSE OF BUSINESS AND THE REFORE NO PART OF THE INTEREST COULD BE DISALLOWED. IT WAS ALSO POINTED OUT THAT THE ASSESSEE HAD BORROWED RS.43.62 CRORES BY WAY OF ISSUE OF DEBENTURES AND THE SAID AMOUNT WAS UTILIZED AS CAPITAL EXPENDITURE AND INTER - CORPORATE DEPOSIT. IT WAS THE ASSES SEES SUBMISSION THAT NO PART OF THE INTEREST BEARING FUNDS (VIZ. ISSUE OF DEBENTURES) HAD GONE INTO MAKING INVESTMENTS IN THE SAID TWO COMPANIES. IT WAS POINTED OUT THAT THE INCOME FROM THE OPERATIONS OF THE ASSESSEE WAS RS.313.53 CRORES AND WITH THE AVA ILABILITY OF OTHER INTEREST FREE FUNDS WITH THE ASSESSEE THE AMOUNT AVAILABLE FOR INVESTMENTS OUT OF ITS OWN FUNDS WERE TO THE TUNE OF RS.398.19 CRORES. IN VIEW THEREOF, IT WAS SUBMITTED THAT FROM THE ANALYSIS OF THE BALANCE - SHEET, THE ASSESSEE HAD ENOUGH INTEREST FREE FUNDS AT ITS DISPOSAL FOR MAKING THE INVESTMENTS. THE CIT (APPEALS) ON EXAMINING THE SAID MATERIAL, AGREED WITH THE CONTENTION OF THE ASSESSEE AND ACCORDINGLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER AND DIRECTED HIM TO ALLOW THE SAME UNDER THE PROVISIONS OF THE INCOME TAX ACT, 1961. THE REVENUE BEING AGGRIEVED BY THE ORDER PREFERRED AN APPEAL BEFORE THE ITAT WHO UPHELD THE ORDER OF THE CIT (APPEALS) AND DISMISSED THE APPEAL OF THE REVENUE. FROM THE ORDER OF THE ITAT, THE REVENUE A PPROACHED THIS COURT BY WAY OF AN APPEAL. AFTER EXAMIN ING THE ENTIRE FACTUAL MATRIX OF THE MATTER AND THE LAW ON THE SUBJECT, THIS COURT HELD AS UNDER: - IF THERE BE INTEREST - FREE FUNDS AVAILABLE TO AN ASSESSEE SUFFICIENT TO MEET ITS INVESTMENTS AND AT TH E SAME TIME THE ASSESSEE HAD RAISED A LOAN IT CAN BE PRESUMED THAT THE INVESTMENTS WERE FROM THE INTEREST - FREE FUNDS AVAILABLE. IN OUR OPINION, THE SUPREME COURT IN EAST INDIA PHARMACEUTICAL WORKS LTD. V. CIT (1997) 224 ITR 627 HAD THE OCCASION TO CONSIDER THE DECISION OF THE CALCUTTA HIGH COURT IN WOOLCOMBERS OF INDIA LTD. (1982) 134 ITR 219 WHERE A SIMILAR ISSUE HAD ARISEN. BEFORE THE SUPREME COURT IT WAS ARGUED THAT IT SHOULD HAVE BEEN PRESUMED THAT IN ESSENCE AND TRUE CHARACTER THE TAXES WERE PAID OUT O F THE PROFITS OF THE RELEVANT YEAR AND NOT OUT OF THE OVERDRAFT ACCOUNT FOR THE RUNNING OF THE BUSINESS AND IN THESE CIRCUMSTANCES THE APPELLANT WAS ENTITLED TO CLAIM THE DEDUCTIONS. THE SUPREME COURT NOTED THAT THE ARGUMENT HAD CONSIDERABLE FORCE, BUT CON SIDERING THE FACT THAT THE CONTENTION HAD NOT BEEN ADVANCED EARLIER IT DID NOT REQUIRE TO BE ANSWERED. IT THEN NOTED THAT IN WOOLCOMBERS OF INDIA LTD.'S CASE (1982) 134 ITR 219 THE CALCUTTA HIGH COURT HAD COME TO THE CONCLUSION THAT THE PROFITS WERE SUFFIC IENT TO MEET THE ADVANCE TAX LIABILITY AND THE PROFITS WERE DEPOSITED IN THE OVER DRAFT ACCOUNT OF THE ASSESSEE AND IN SUCH A CASE IT SHOULD BE PRESUMED THAT THE TAXES WERE PAID OUT OF THE PROFITS OF THE YEAR AND NOT OUT OF THE OVERDRAFT ACCOUNT FOR THE RU NNING OF THE BUSINESS. IT NOTED THAT TO RAISE THE PRESUMPTION, THERE WAS SUFFICIENT MATERIAL AND THE ASSESSEE HAD URGED THE CONTENTION BEFORE THE HIGH COURT. THE PRINCIPLE, THEREFORE, WOULD BE THAT IF THERE WERE FUNDS AVAILABLE BOTH INTEREST - FREE AND OVER DRAFT AND/OR LOANS TAKEN, THEN A PRESUMPTION WOULD ARISE THAT INVESTMENTS WOULD BE OUT OF THE INTEREST - FREE FUNDS GENERATED OR AVAILABLE WITH THE COMPANY IF THE INTEREST - FREE FUNDS WERE ITA NO. 934 /PN/20 1 5 ITA NO.615/PN/2015 SHANKARRAO MOHITE PATIL SAH. BANK LTD. & ANR 8 SUFFICIENT TO MEET THE INVESTMENT. IN THIS CASE THIS PRESUMPTION IS ES TABLISHED CONSIDERING THE FINDING OF FACT BOTH BY THE COMMISSIONER OF INCOME - TAX (APPEALS) AND THE INCOME - TAX APPELLATE TRIBUNAL. (EMPHASIS SUPPLIED ) 5. WE FIND THAT THE FACTS OF THE PRESENT CASE ARE SQUARELY COVERED BY THE JUDGMENT IN THE CASE OF RELIA NCE UTILITIES AND POWER LTD. (SUPRA). THE FINDING OF FACT GIVEN BY THE ITAT IN THE PRESENT CASE IS THAT THE ASSESSEE'S OWN FUNDS AND OTHER NON - INTEREST BEARING FUNDS WERE MORE THAN THE INVESTMENT IN THE TAX - FREE SECURITIES. THIS FACTUAL POSITION IS NOT ONE THAT IS DISPUTED. IN THE PRESENT CASE, UNDISPUTEDLY THE ASSESSEE'S CAPITAL, PROFIT RESERVES, SURPLUS AND CURRENT ACCOUNT DEPOSITS WERE HIGHER THAN THE INVESTMENT IN THE TAX - FREE SECURITIES. IN VIEW OF THIS FACTUAL POSITION, AS PER THE JUDGMENT OF THIS COU RT IN THE CASE OF RELIANCE UTILITIES AND POWER LTD. (SUPRA), IT WOULD HAVE TO BE PRESUMED THAT THE INVESTMENT MADE BY THE ASSESSEE WOULD BE OUT OF THE INTEREST - FREE FUNDS AVAILABLE WITH THE ASSESSEE. WE THEREFORE, ARE UNABLE TO AGREE WITH THE SUBMISSION OF MR SURESH KUMAR THAT THE TRIBUNAL HAD ERRED IN DISMISSING THE APPEAL OF THE REVENUE ON THIS GROUND. WE DO NOT FIND THAT QUESTION (A) GIVES RISE TO ANY SUBSTANTIAL QUESTION OF LAW AND IS THEREFORE REJECTED. 6. EVEN AS FAR AS QUESTION (B) IS CONCERNED, WE FIND NO INFIRMITY IN THE ORDERS PASSED BY THE CIT (APPEALS) OR THE ITAT. IN DECIDING THIS ISSUE, CIT (APPEALS) AND THE ITAT HAVE MERELY FOLLOWED THE JUDGMENT OF THIS COURT IN THE CASE OF AMERICAN EXPRESS INTERNATIONAL BANKING CORPORATION V/S COMMISSIONER O F INCOME TAX, REPORTED IN (2002) 258 ITR 601. ON GOING THROUGH THE SAID JUDGMENT, WE FIND THAT QUESTION (B) REPRODUCED ABOVE AND PROJECTED AS SUBSTANTIAL BY MR SURESH KUMAR IS SQUARELY ANSWERED BY THE JUDGMENT OF THIS COURT IN THE CASE OF AMERICAN EXPRESS INTERNATIONAL BANKING CORPORATION (SUPRA). IN VIEW THEREOF, WE DO NOT FIND THAT EVEN QUESTION (B) GIVES RISE TO ANY SUBSTANTIAL QUESTION OF LAW THAT NEEDS TO BE ANSWERED BY THIS COURT. SUBSTANTIAL QUESTION OF LAW THAT NEEDS TO BE ANSWERED BY THIS COURT. 7. AS FAR AS QUESTION (C) IS CONCERNED, WE FIND THAT AN IDENTICAL QUES TION OF LAW WAS FRAMED AND ANSWERED IN FAVOUR OF THE ASSESSEE BY THIS COURT IN ITS JUDGEMENT DATED 4TH JULY, 2014 IN INCOME TAX APPEAL NO.1079 OF 2012, COMMISSIONER OF INCOME TAX - 2 V/S M/S LORD KRISHNA BANK LTD. (NOW MERGED WITH HDFC BANK LTD.). MR SURESH KUMAR FAIRLY STATED THAT QUESTION (C) REPRODUCED ABOVE IS COVERED BY THE SAID ORDER. IN VIEW THEREOF, WE ARE OF THE VIEW THAT EVEN QUESTION (C) DOES NOT RAISE ANY SUBSTANTIAL QUESTION OF LAW THAT REQUI RES AN ANSWER FROM US. 14. FOLLOWI NG THE SAME PARITY OF REASONING, WE HOLD THAT THE ASSESSEE IS ENTITLED TO THE CLAIM OF DEDUCTION ON ACCOUNT OF AMORTIZATION OF PREMIUM PAID ON GOVERNMENT SECURITIES HELD IN HTM CATEGORY. UPHOLDING THE ORDER OF CIT(A), WE DISMISS THE GROUNDS OF APPEAL RAIS ED BY THE REVENUE. 1 5 . THE GROUNDS OF APPEAL NO.9 AND 10 ARE GENERAL IN NATURE, HENCE, THE SAME ARE DISMISSED. ITA NO. 934 /PN/20 1 5 ITA NO.615/PN/2015 SHANKARRAO MOHITE PATIL SAH. BANK LTD. & ANR 9 16. THE FACTS AND ISSUES IN ITA NO.615/PN/2015 ARE SIMILAR TO THE FACTS AND ISSUES IN ITA NO.934/PN/2015 AND OUR DECISION IN ITA NO.934/PN/201 5 SHALL APPLY MUTATIS MUTANDIS TO ITA NO.615/PN/2015. 17. IN THE RESULT, BOTH THE APPEAL S OF THE REVENUE ARE DISMISSED . ORDER PRONOUNCED ON THIS 10 TH DAY OF FEBRU ARY , 201 6 . SD/ - SD/ - (PRADIP KUMAR KEDIA) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 10 TH FEBR UARY , 201 6 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : / COPY OF THE ORDER IS FORWARDED TO : 1. / THE A PPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) - 7 , PUNE ; 4. / THE CIT - 6 , PUNE ; 5. , , , / DR A , ITAT, PUNE; / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE