ACIT, Circle 3(1), Dhule V. The Shahada People Co-operative Bank Ltd., Nandurbar

ITA 996/PUN/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 72101 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 18-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANCHAL SHARMA
• Keywords: Depreciation; Revised return
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE: SHRI G. S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO. 996 / P N/ 20 12 ASSESSMENT YEAR : 2009 - 10 ASST. COMMISSIONER OF INCOME TAX, CI RCLE - 3(1), DHULE VS. THE SHAHADA PEOPLE CO - OPERATIVE BANK LTD., SHAHADA, NANDURBAR (APPELLANT) (RESPONDENT) PAN NO. AAABT0239L APPELLANT BY: SHRI ANCHAL SHARMA RESPONDENT BY: SHRI PRAMOD SHINGTE DATE OF HEARING : 26 - 07 - 2013 DATE OF PRONOUNCE MENT : 27 - 08 - 2013 ORDER P ER R.S. PADVEKAR , JM : - IN THIS APPEAL, THE REVENUE HAS CHALLENGED THE IMPUGNED ORDER OF THE LD. CIT(A) - I, NASHIK DATED 12 - 03 - 2012 FOR THE A.Y. 2009 - 10. THE ISSUE IN CONTROVERSY IS WHETHER THE LD. CIT(A) WAS JUSTIFIED ALLO WING THE CLAIM OF THE ASSESSEE OF RS.50,24,000/ - IN RESPECT OF DEPRECIATION ON THE SECURITIES CLAIMED BY THE ASSESSEE BANK. 2. THE BRIEFLY STATED FACTS ARE AS UNDER. THE ASSESSEE IS A CO - OPERATIVE BANK FUNCTIONING AT SHAHADA, A BACKWARD PLACE IN NANDUR BAR DISTRICT. THE ASSESSEE BANK HAS FILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS . 34,14,49,955/ - FOR THE A.Y. 2009 - 10 . B UT SUBSEQUENTLY REVISED THE SAID RETURN BY DECLARING THE TOTAL LOSS OF RS.1,33,473/ - . SO FAR AS THE ISSUE OF DEPRECIATION ON TH E SECURITIES OF RS.50,24,000/ - IS CONCERNED , T HE ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE HAS CLAIMED DEDUCTION OF RS. 48, 8 5,000/ - ON ACCOUNT OF DEPRECIATION ON INVESTMENT AND RS.1,39,000/ - ON ACCOUNT OF OTHER RISK PROVISIONS , A S PER THE RBI REPORT . I N THE OPINION OF THE ASSESSING OFFICER THE DEPRECIATION CLAIMED BY THE ASSESSEE WAS NOT ALLOWABLE U/S. 32 OF THE ACT. HE 2 ITA NO. 996/PN/2012, THE SHAHADA PEOPLE CO - OPERATIVE BBANK LTD., SHAHADA ACCORDINGLY DISALLOWED THE SAME. THERE IS NO MUCH DISCUSSION IN THE ASSESSMENT ORDER . W HEN THE MATTER WAS CARRIED BEFORE THE LD. CIT (A) , T HE LD. CIT(A) HAS OBSERVED THAT UNDER THE GUIDELINES ISSUED BY THE RBI THE ASSESSEE BANK WAS REQUIRED TO PROVIDE FOR DEPRECIATION ON INVESTMENT ON ITS INVESTMENT PORTFOLIO. THE LD. CIT(A) ALSO REFERRED TO THE GUIDELINES ISSUED BY THE RBI DATED 02 - 07 - 2007. T HE ASSESSEE S INVESTMENT PORTFOLIO WAS TO THE EXTENT OF RS.1,00,11,89,50,714/ - AND IN THE PROFIT AND LOSS A/C , T HE ASSESSEE PROVIDED DEPRECIATION ON INVESTMENT TO THE EXTENT OF RS.48,85,000/ - AND ALSO MADE THE OTHER RISK PROVISIONS TO THE EXTENT O F RS.1,39,000/ - , I.E. TOTALING RS.50,24,000/ - . THE LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE. NOW THE REVENUE BEING AGGRIEVED IS IN APPEAL BEFORE US. 3. WE HAVE HEARD THE PARTIES. THE LEARNED COUNSEL SUBMITS THAT THE ISSUE STAND COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THIS TRIBUNAL IN THE CASE OF THE SANGLI BANK LTD VS. ACIT, CIRCLE - 2 IN ITA NO. 846/PN/2006 ORDER DATED 30 - 05 - 2013. THE LEARNED COUNSEL HAS FILED COPY OF THE TRIBUNAL ORDER IN THE CASE OF THE SANGLI BANK LTD. (SUPRA) WHIC H IS PLACED ON RECORD. WE HAVE ALSO HEARD THE LD. DR. 4. IN THE CASE OF THE SANGLI BANK LTD (SUPRA) THE ISSUE OF ALLOWABILITY OF THE LOSS TOWARDS DIMINUTION IN THE VALUE OF SECURITIES , CLASSIFIED AS H ELD T ILL M ATURITY (HTM) HAS BEEN CONSIDERED BY THE ITA T, PUNE. THE OPERATIVE PART OF THE FINDINGS OF THE TRIBUNAL ORDER IS AS UNDER: 4. WE FIND THAT THE ASSESSEE HAS CLASSIFIED THE SECURITIES IN THE THREE CATEGORIES (A) HELD TILL MATURITY (HTM), (B) AVAILABLE FOR SALE (AFS) AND (C) HELD FOR TRADING (HFT). THE ASSESSING OFFICER WAS OF THE OPINION THAT THE LOSS ON DIMINUTION OF THE VALUE OF THE SECURITIES CANNOT BE CHARGED TO THE PROFIT AND LOSS ACCOUNT IN THE CASE OF SECURITIES HELD UNDER THE CATEGORY OF HTM. WE FIND THAT THE ASSESSEE BANK HAS FOLLOWED THE RBI GUIDELINES AND AS PER THE RBI GUIDELINES THE ASSESSEE HAS MADE THE PROVISION OF RS.9.45 CRORES ON ACCOUNT OF DIMINUTION IN VALUE OF SECURITIES. IN THIS CASE, AN AMOUNT 3 ITA NO. 996/PN/2012, THE SHAHADA PEOPLE CO - OPERATIVE BBANK LTD., SHAHADA OF RS.1,48,96,027/ - BEING AMORTIZATION IN RESPECT OF DIMINUTION IN THE VALUE OF THO SE SECURITIES ATTRIBUTABLE TO FINANCIAL YEAR 2003 - 04 WAS ADDED TO THE INCOME IN THE COMPUTATION. THE PROFIT ON ACTUAL REALIZATION ON SALE OF THE SECURITIES OF RS.23.20 CRORES HAD BEEN CREDITED TO THE PROFIT AND LOSS ACCOUNT AND THIS METHOD IS CONSISTENTLY FOLLOWED BY THE ASSESSEE IN PRECEDING YEARS. 5. WE FURTHER FIND THAT AS PER THE WORKING MADE BY THE ASSESSEE THERE IS NO LOSS OF REVENUE WHICH IS CLEAR FROM THE WORKING GIVEN ON PAGE NO. 4 OF THE ORDER OF THE LD. CIT(A). (RS. IN LACS) PROFIT : (III) (ACTUAL) 2746.06 PROFIT : (IV)(ACT UAL) 108.56 ________ 2854.62 LES S : LOSS (VI) (ACTUAL) 425.24 ________ 2429.38 LESS : DI MINUTION IN VALUE (VII) 588.37 ________ 1841 .01 ADD : DIMINUTION CLAIM ALLOWED IN OPENING STOCK 900.36 ________ 2741.37 LESS : DIMINUTION IN V ALUE IN CLOSING (VIII) STOCK 945.00 ________ NET RS. 1796.37 6. WE FIND THAT THE RESERVATION OF LD. CIT(A) IS THAT THE RE IS THE DEFERMENT OF THE REVENUE THAN ACTUAL LOSS OF REVENUE. WE DO NOT AGREE WITH THE OPINION OF LD. CIT(A). ADMITTEDLY THE SAID METHOD IS CONSISTENTLY FOLLOWED BY THE BANK IN THE PRECEDING YEARS AND THE SAME HAS BEEN ACCEPTED WITHOUT RAISING ANY QUES TION. IF AT THIS JUNCTURE WE GO WITH THE STAND OF THE REVENUE THEN THAT WILL DISTORT THE ENTIRE PICTURE. ADMITTEDLY WHATEVER THE EXPENDITURE IS AMORTIZED THE SAME IS ADDED BACK WHEN THE SECURITIES ARE SOLD. ANOTHER ASPECT WE ARE TO CONSIDER IS THAT THE METHOD AND PRACTICE ADOPTED BY THE ASSESSEE WAS NEVER CHANGED BY THE ASSESSING OFFICER IN PAST. 4 ITA NO. 996/PN/2012, THE SHAHADA PEOPLE CO - OPERATIVE BBANK LTD., SHAHADA 7. SO FAR AS THE SECURITIES HELD UNDER THE HTM CATEGORY THE I.T.A.T., PUNE HAS TAKEN A VIEW IN THE CASE OF LATUR URBAN CO - OPERATIVE BANK LTD. VS. ACIT ITA NOS. 778 AND 792/PN/2011 ORDER DATED 31 - 08 - 2012 THAT ALL THE SECURITIES HELD BY THE ASSESSEE ARE PART OF THE STOCK - IN - TRADE IRRESPECTIVE OF THEIR CLASSIFICATION. SO FAR AS THE TREATMENT OF THE ASSESSEE IN CLASSIFYING THE SECURITIES, IN OUR OPINION THE SECURIT IES CLASSIFIED UNDER HTM CATEGORY IS ALSO PART OF THE STOCK - IN - TRADE. THERE IS RBI CIRCULAR AS PER WHICH THE ASSESSEE CAN AMORTIZE THE DEPRECIATION OR LOSS ON THE CONVERSION OF SECURITIES FROM FST CATEGORY TO HTM CATEGORY. WE, THEREFORE, DO NOT AGREE WIT H THE VIEW TAKEN BY THE LD. CIT(A) THAT THE SECURITIES HELD UNDER HTM ARE CAPITAL IN NATURE. WE ACCORDINGLY ALLOW THE GROUND NO. 1 TAKEN BY THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE IN LIGHT OF THE ABOVE DISCUSSION. 5. AGAIN IN THE CASE OF THE THANE JANATA SAHAKARI BANK LTD. (SUCCESSOR TO SHRI SADGURU JANGLI MAHARAJ SAHAKARI BANK LTD.) VS. ITO, WARD - 10(1), PUNE IN ITA NO. 1215/PN/2010 ORDER DATED 31 - 01 - 2013 , T HE ISSUE OF ALLOWABILITY OF DEPRECIATION ON THE SECURITIES HAS BEEN CONSIDERED BY THE TRIBUNAL AND HELD AS UNDER: 9. THE FACTS ARE MENTIONED HERE - IN - ABOVE. ADMITTEDLY THE ASSESSMENT IS FRAMED ON THE BASIS OF ORIGINAL RETURN FILED BY THE ASSESSEE BANK AND REVISED RETURN HAS BEEN DISCARDED. IN THE RETURN THE ASSES SEE HAS CLAIMED THE LOSS ON REVALUATION OF THE SECURITIES TO THE EXTENT OF RS.19,11,97,856/ - THAT WAS RELATING TO THE INVESTMENT HELD UNDER THE CATEGORY HELD TO MATURITY (HTM) AND RS.26,927/ - ON RE - VALUATION OF INVESTMENT HELD UNDER AVAILABLE FOR SALE (AFS ). NOW THE LAW IS WELL SETTLED BY THE DIFFERENT JUDICIAL PRONOUNCEMENT THAT ALL THE SECURITIES HELD BY THE BANK IN THE COMPLIANCE WITH THE GUIDELINES ISSUED THE RBI UNDER THE BANKING REGULATION ACT ARE THE PART OF STOCK - IN - TRADE ONLY. IN THE PRESENT CASE, IT IS CONSISTENTLY STATED BY THE ASSESSEE BANK THAT THE SECURITIES HELD UNDER AFS AND HTM ARE AS PER THE STATUTORY LIQUIDATED RATIO (SLR). THE ASSESSEES CASE IS SQUARELY COVERED BY THE DECISION OF THE ITAT BANGALORE BENCH IN THE CASE OF STATE BANK OF MY SORE VS. DCIT (2009) 33 SOT 7 (BANG) . 10. WE FURTHER FIND THAT IN THE CASE OF BANK OF BARODA (SUPRA) AS WELL AS KARUR VYASYA BANK LTD. (SUPRA) IT IS HELD THAT THE VALUATION 5 ITA NO. 996/PN/2012, THE SHAHADA PEOPLE CO - OPERATIVE BBANK LTD., SHAHADA IS TO BE MADE AT COST OR MARKET RATE, WHICHEVER IS LOWER. WE FURTHER HOLD THAT THE SECURITIES HELD UNDER HTM CATEGORY ARE PART OF STOCK - IN - TRADE OF THE BANK AND THERE IS NO JUSTIFICATION TO DECLINE THE CLAIM OF DEPRECIATION/LOSS ON THE VALUATION OF THE SAID SECURITIES. WE ACCORDINGLY ALLOW THE GROUND NO. 1 TAKEN BY THE ASSESSEE. S O FAR AS THE GROUND NO. 2 IS CONCERNED IT IS ONLY THE SUPPORTING TO THE GROUND NO. 1 HENCE, NO SPECIFIC ADJUDICATION IS REQUIRED. 6. WE, THEREFORE, UPH O LD THE ORDER OF THE LD. CIT(A) O N THIS ISSUE FOLLOWING THE ABOVE REFERRED DECISIONS AND DISMISS THE GRO UND TAKEN BY THE REVENUE. 7. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 27 - 08 - 20 1 3 SD/ - SD/ - ( G.S. PANNU ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER RK / PS PUNE , DATED : 27 TH AUGUST, 20 1 3 COPY TO 1 DEPARTMENT 2 ASSESSEE 3 THE CIT(A) - I, NASHIK 4 THE CIT - I, NASHIK 5 THE DR, ITAT, B BENCH, PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE