The TJSB SAHAKARI BANK LTD, Thane V. CIT - V, Pune

ITA 966/PUN/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76292 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 19-03-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 15-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VERMA
• Keywords: Depreciation; Cost of acquisition; Revised return; Revenue expenditure
• Section: 143(3); 139(5); 263

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. 966 / P N/ 20 1 2 ASSESSMENT YEAR : 200 7 - 08 THE TJSB SAHAKARI BANK LTD. (SUCCESS OR TO SHRI SADGURU JANGLI MAHARAJ SAHAKARI BANK LTD.), TJSB HOUSE, PLOT NO. 5B, ROAD NO. 2, WAGLE ESTATE, THANE (W) VS. COMMISSIONER OF INCOME TAX - (V) , PUNE (APPELLANT) (RESPONDENT) PAN NO. AACTS5051R APPELLANT BY: SMT. DEEPA KHARE RESPONDENT BY: SMT. M.S. VERMA DATE OF HEARING : 20 - 03 - 2013 DATE OF PRONOUNCEMENT : 26 - 03 - 2014 ORDER P ER R.S. PADVEKAR , JM : - IN THIS APPEAL , THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER OF THE LD. CIT(A) - V , PUNE DATED 27 - 07 - 2010 FOR THE A.Y. 200 7 - 08 PASSE D U/S. 263 OF THE INCOME - TAX ACT . THE ASSESSEE HAS TAKEN MULTIPLE AND ARGUMENTATIVE GROUNDS BUT THE SOLITARY ISSUE FOR OUR CONSIDERATION IS WHETHER THE CIT(A) - V JUSTIFIED IN EXERCISING HIS JURISDICTION U/S. 263 OF THE INCOME - TAX ACT BY HOLDING THAT THE AS SESSING OFFICER HAS WITHOUT APPLICATION OF MIND ALLOWED THE AMORTIZATION OF THE PREMIUM TO THE EXTENT OF RS.1,62,32,348/ - PAID ON THE SECURITIES HELD UNDER THE CATEGORY HELD TO MATURITY (HTM) AND THEREBY SET ASIDE THE ASSESSMENT ORDER PASSED BY THE ASSES SING OFFICER U/S. 143(3) DATED 29 - 12 - 2009. 2. THE BRIEFLY STATED FACTS ARE AS UNDER. THE ASSESSEE IS A CO - OPERATIVE SOCIETY, ENGAGED IN THE BUSINESS OF BANKING. FOR THE A.Y. 2007 - 08 T HE ASSESSEE FILED THE RETURN OF INCOME DECLARING TOTAL INCOME AT RS. NIL. THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY BY ISSUING THE 2 ITA NO . 966 /PN/201 2, THE TJSB SAHAKARI BANK LTD., THANE NOTICE U/S. 143(2) BY THE ASSESSING OFFICER. IT APPEARS THAT CERTAIN QUERIES WERE RAISED IN THE COURSE OF THE ASSESSMENT PROCEEDINGS AND THE ASSESSEE FILED THE REVISED RETURN OF INCOME FO R THE A.Y. 2007 - 08 ON 23 - 10 - 2009 IN WHICH IN PLACE OF ORIGINAL LOSS DECLARED, THE ASSESSEE OFFERED AND DECLARED THE INCOME TO THE EXTENT OF RS.6,33,13,660/ - AND AGAINST THE SAID INCOME WAS THE BROUGHT FORWARD LOSSES OF THE EARLIER YEARS WERE SET OFF WHICH AGAIN RESULTED INTO NIL INCOME. 3. ON THE PERUSAL OF THE ASSESSMENT ORDER , IT IS SEEN THAT THE ASSESSING OFFICER SOUGHT THE DIRECTIONS OF THE ADD. CIT, RANGE - 10, PUNE U/S. 144A OF THE INCOME - TAX ACT. IT IS TO BE TAKEN NOTE OF THE FACTS THAT ORIGINALLY THE BANK WAS KNOWN AS SHRI SADGURU J.M. SAHAKARI BANK LTD. WHICH HAS BEEN TAKEN OVER BY THE THANE JANATA SAHAKARI BANK LTD. W.E.F. 18 - 08 - 2007. THE ASSESSMENT OF THE ASSESSEE WAS COMPLETED AS PER THE DIRECTIONS ISSUED BY THE ADDL. CIT, RANGE - 10, PUNE COMPU TING TOTAL INCOME AT RS.6,33,13,660/ - . THE REVISED RETURN FILED BY THE ASSESSEE WAS TREATING AS NON - EST R ETURN AS THE SAME WAS FILED BEYOND THE TIME LIMIT PRESCRIBED U/S. 139(5) OF THE ACT. THERE IS A DETAIL DISCUSSION IN RESPECT OF THE SECURITIES CLASSI FIED AS AVAILABLE FOR SALE (AFS), HELD FOR TRADING (HFT) AND HELD TO MATURITY (HTM). IN THE ASSESSMENT ORDER IN RESPECT OF LOSS CLAIMED BY THE ASSESSEE, THERE IS NO CLEAR DISCUSSION IN RESPECT OF THE AMORTIZATION OF PREMIUM PAID BY THE ASSESSEE ON THE SEC URITIES CLASSIFIED AS HTM. AS PER THE PRUDENTIAL NORMS OF THE RBI PREMIUM PAID ON THE SECURITY WAS AMORTIZE D BY THE ASSESSEE BANK FOR THE PERIOD OF MATURITY OF THE SECURITIES HELD UNDER HTM . THE CIT - V, PUNE ISSUED THE SHOW - CAUSE NOTICE EXERCISING HIS REV ISIONARY POWERS U/S. 263 OF THE ACT ONLY REASON FOR ISSUANCE OF NOTICE BY EXERCISING THE POWER S U/S. 263 IS THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN ALLOWING THE CLAIM OF AMORTIZATION OF PREMIUM IN RESPECT OF THE PREMIUM PAID ON SECURITIES CLASSIFIE D UNDER THE HTM. 3 ITA NO . 966 /PN/201 2, THE TJSB SAHAKARI BANK LTD., THANE 4 . WE HAVE HEARD THE PARTIES. THE LD. COUNSEL SUBMITS THAT ON MERIT ITSELF THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDICIAL PRONOUNCEMENT OF THE ITAT, B BENCH, PUNE IN THE CASE OF BHAGINI NIVEDITA SAHAKARI BANK LTD. VS. DY. CIT, CIRCLE - 1(1), PUNE ITA NO. 690/PN/2013 ORDER DATED 27 - 11 - 2013. PER CONTRA, THE LD. CIT (DR) SUPPORTED THE ORDER OF THE CIT - V, PUNE 5 . IN THE CASE OF BHAGINI NIVEDITA SAHAKARI BANK LTD. (SUPRA) THE ISSUE HAS COME FOR THE CONSIDERATION AND THE ITA T, PUNE FOLLOWING THE DECISION IN THE CASE OF BANK OF RAJASTHAN LTD. (2011) TIOL - 35 - ITAT - MUMBAI HAS HELD AS UNDER: 7. IN PARA (VII) OF THE CBDT INSTRUCTION NO.17 OF 2008 DATED 26.11.2008, ON ASSESSMENT OF BANK CHECK LIST FOR DEDUCTION, STATES AS UNDER: AS PER RBI GUIDELINES DATED 16 TH OCTOBER, 2000, THE INVESTMENT PORTFOLIO OF THE BANKS IS REQUIRED TO BE CLASSIFIED UNDER THREE CATEGORIES VIZ. HELD TO MATURITY (HTM), HELD FOR TRADING (HFT) AND AVAILABLE FOR SALE (AFS). INVESTMENTS CLASSIFIED UNDER HTM CATEGORY NEED NOT BE MARKED TO MARKET AND ARE CARRIED AT ACQUISITION COST UNLESS THESE ARE MORE THAN THE FACE VALUE, IN WHICH CASE THE PREMIUM SHOULD BE AMORTISED OVER THE PERIOD REMAINING TO MATURITY. IN THE CASE OF HFT AND AFS SECURITIES FORMING STOCK IN TRADE OF THE BANK, THE DEPRECIATION/APPRECIATION 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. 8. TH E ITAT, MUMBAI BENCH, IN THE CASE OF ACIT VS. THE BANK OF RAJASTHAN LTD. (2011) TIOL - 35 - ITAT - MUMBAI, HAS HELD THAT IN CASE OF BANKS, THE PREMIUM PAID IN EXCESS OF FACE VALUE OF INVESTMENTS CLASSIFIED UNDER HTM CATEGORY WHICH HAS BEEN AMORTISED OVER THE PER IOD TILL MATURITY IS ALLOWABLE AS REVENUE EXPENDITURE SINCE THE CLAIM IS AS PER RBI GUIDELINES AND CBDT ALSO HAS DIRECTED TO ALLOW SUCH PREMIUM. IT HAS ALSO BEEN HELD IN THE CASE OF CATHOLIC SYRIAN BANK LTD. VS. ACIT THAT AMORTISATION ON PURCHASE OF GOVER NMENT SECURITIES WAS MADE AS PER PRUDENTIAL NORMS OF THE RBI AND SAME WAS ALLOWABLE DEDUCTION. IN VIEW OF ABOVE, ASSESSEE WAS JUSTIFIED 4 ITA NO . 966 /PN/201 2, THE TJSB SAHAKARI BANK LTD., THANE IN CONTENDING FOR AMORTISATION OF PREMIUM PAID IN EXCESS OF FACE VALUE OF SECURITIES HELD TO MATURITY (HTM) CATEGORY OR PERIOD REMAINING TILL MATURITY WAS FOUND REASONABLE BY THE CIT(A). ACCORDINGLY ADDITION OF RS.17,91,659/ - MADE BY THE ASSESSING OFFICER BY DISALLOWING AMOUNT TOWARDS AMORTISATION OF GOVERNMENT SECURITIES (HMT) WAS DELETED. THIS REASONED FACTUAL AND LEGA L FINDING OF THE CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 6 . THE ISSUE STANDS ALSO COVERED IN FAVOUR OF THE ASSESSEE ON MERIT ITSELF BY THE DECISION OF THE ITAT, A BENCH, PUNE IN THE CASE OF BHARATI SAHAKARI BANK LTD. VS. DY. CIT, C IRCLE - 1(1), PUNE ITA NO. 898/PN/2013 ORDER DATED 29 - 11 - 2013. THE OPERATIVE PART OF THE FINDING OF THE TRIBUNAL IS AS UNDER: 4. WE HAVE HEARD THE PARTIES. WE FIND THAT THE ISSUE STAND COVERED IN FAVOUR OF THE ASSESSEE, THE DECISION IN THE CASE OF LATUR U RBAN 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 IRRESPECTIVE OF CLASSIFICATION AND AS PER RBI GUID ELINES. 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. BANK OF BARODA AND IN THE CASE OF UCO BAN K 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 METHOD OF VALUATION FOLLOWED BY THE ASSESS EE 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 WAS DISALLOWED BY THE A.O, BUT THE ASSESS EE 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 BANK FOR VALUING THE STOCK OF THE SECURIT IES. THE HONBLE HIGH COURT 5 ITA NO . 966 /PN/201 2, THE TJSB SAHAKARI BANK LTD., THANE FOLLOWED THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF UNITED COMMERCIAL BANK (SUPRA). 15. IN THE CASE OF UNITED COMMERCIAL BANK (SUPRA), EVEN THE ISSUE OF VALUATION OF THE STOCK IN TRADE OF THE INVESTMENT WAS BEFORE TH E 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 CA SE, 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, NOMENCLAT URE 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. 7 . WE ARE, THEREFORE, OF THE OPINION THAT THE ASSESSMENT O RDER WHICH IS MADE THE SUBJECT MATTER OF THE REVISION U/S. 263 OF THE ACT IS NOT ERRONEOUS ORDER AS THE ISSUE OF AMORTIZATION OF PREMIUM PERTAINING TO THE SECURITIES HELD UNDER HTM CATEGORY. AS PER THE NORMS OF THE RBI AMORTIZATION OF PREMIUM ON SECURITY HELD UNDER HTM IS ALLOWABLE DEDUCTION SUPPORTED BY THE JUDICIAL PRECEDENT S. A S HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF MALBAR INDUSTRIAL CO. LTD. VS. CIT 243 ITR 83 (SC) TWO MANDATES OF SEC. 263 OF THE ACT MUST BE FULFILL ED FOR EXERCISING HIS JUR ISDICTION BY THE COMMISSIONER , THE ORDER MUST BE ERRONEOUS AND IT SHOULD ALSO BE PREJUDICIAL TO THE INTEREST OF THE REVENUE . U NLESS BOTH THE AMOUNTS ARE FULFILL ED T HE CIT HAS NO JURISDICTION TO INTERFERE IN ANY OF THE ORDER BY EXERCISING HIS POWERS U/S. 2 63. THE EXPRESSION ERRONEOUS CONTEMPLATES NOT IN ACCORDANCE WITH THE LAW . M OREOVER , AS WE HAVE HELD THAT THE ASSESSMENT ORDER IS NOT ERRONEOUS AS THE ASSESSING OFFICER HAS ALLOWED THE CLAIM OF THE AMORTIZATION OF 6 ITA NO . 966 /PN/201 2, THE TJSB SAHAKARI BANK LTD., THANE PREMIUM ON THE SECURITIES HELD UNDER HT M HENCE, THE POWER EXERCISED BY THE CIT ITSELF IS ERRONEOUS. WE, ACCORDINGLY, CANCEL THE ORDER PASSED BY THE CIT - V, PUNE FOR THE A.Y. 2007 - 08 DATED 28 - 03 - 2012 AND ALLOW THE APPEAL FILED BY THE ASSESSEE. 8 . IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 26 - 03 - 2014 SD/ - SD/ - ( R.K. PANDA ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER RK /PS PUNE , DATED : 26 TH MARCH, 2014 COPY TO 1 DEPARTMENT 2 ASSESSEE 3 THE CIT (A) - V, PUNE 4 THE CIT - V, PUNE 5 THE DR, ITAT, A BENCH, PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE