City Union Bank Limited, Kumbakonam V. DCIT, Kumbakonam

MA 208/CHNY/2011

• Counselvise Citation: [2011] 123 COUNSELVISE.COM (IT) 7359 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 3 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 16-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-12-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 13-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JR
• Assessee Lawyers: V D GOPAL
• Keywords: Question of law; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH B CHENNAI BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER .. M.P NOS. 205 TO 210/MDS/2011 [A/O ITA NOS. 935,937,939,940,770 & 1507 ASSESSMENT YEARS 2002-03, 2004-05, 2005-06, 2006-07 , 2007-08 & 2003-04] M/S CITY UNION BANK LTD 149, T.S.R. BIG STREET KUMBAKONAM (PAN NO. AAACC 1287 E) VS. THE DY.C.I.T CIRCLE I KUMBAKONAM (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI V.D. GOPAL, ADVOCATE DEPARTMENT BY : SHRI K.E.B. RENGARAJAN JR. STANDING COUNSEL O R D E R PER N.S. SAINI: THE M.P NOS. 205 TO 209/MDS/2011 ARISE OUT OF THE CONSOLIDATED ORDER OF THE TRIBUNAL ORDER DATED 8.7. 2011 PASSED IN ITA NOS. 935, 937, 939, 940, 770/MDS/10 AND M.P NO. 210/MDS/2011 ARISES OUT OF THE TRIBUNAL ORDER DATED 30.10.2009 P ASSED IN ITA NO. PAGE 2 OF 7 MP NOS. 205 TO 210//MDS/2011 CITY UNION BANK LTD. KUMBAKONAM 1507/MDS/10. SINCE THE ISSUES INVOLVED IN ALL THES E APPEALS ARE SAME, WE ARE DISPOSING THEM OFF BY THIS CONSOLIDATE D ORDER FOR THE SAKE OF BREVITY AND CONVENIENCE. 2. IN ALL THESE M.PS, THE ASSESSEES COMMON SUBMISS ION IS AS UNDER: THE ABOVE PETITIONER IS ASSESSED TO TAX IN PAN AAAC C1287E BY THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE -I, KUMBAKONAM. THE APPEAL FOR THE ABOVE YEAR WAS PREFE RRED BY THE DEPARTMENT AND THE PETITIONER IS THE RESPOND ENT IN THE ABOVE APPEAL. THE APPEAL WAS DISPOSED OFF BY T HE TRIBUNAL VIDE CONSOLIDATED ORDER DATED 08.07.2011. AMONG OTHER ISSUES, THE DEPARTMENT HAS AGITATED THE ISSUE O F INTEREST PAID ON PURCHASE OF SECURITIES AND CONTEN DED THAT THE SAME IS NOT ALLOWABLE AS REVENUE EXPENDITURE. THE HONOURABLE TRIBUNAL HAS DECIDED THE ISSUE IN FAVO UR OF THE DEPARTMENT BY FOLLOWING ITS EARLIER ORDER IN PE TITIONERS OWN CASE FOR THE ASST-YEAR-2003-04. THE PETITIONER HEREBY SUBMITS THAT THE ISSUE OF INTEREST PAID ON PURCHASE OF SECURITIES HAS ALREADY BEEN DECIDED AGAINST THE DEPA RTMENT BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S THE KARUR VYSYA BANK LIMITED IN C.NO. 2139 OF 2008 ORDER DATE D 13.07.2009 AND THE HONOURABLE HIGH COURT DISPOSED THE CASE PAGE 3 OF 7 MP NOS. 205 TO 210//MDS/2011 CITY UNION BANK LTD. KUMBAKONAM BY FOLLOWING ITS OWN DECISION REPORTED IN 273 ITR 5 10. THE SLP FILED BY THE DEPARTMENT AGAINST THE ORDER OF TH E HIGH COURT HAS ALSO BEEN DISMISSED VIDE ORDER DATED 09.07 .2010. HENCE PETITIONER SUBMIT THAT BASED ON THE DECISION, THE INTEREST PAID ON PURCHASE OF SECURITIES IS ALLOWABLE AS REVENUE EXPENDITURE. AS THE ABOVE MISTAKES ARE MISTAKE APPARENT FROM THE RECORD, THE PETITIONER RESPECTFULLY PRAYS THAT THE HONOURABLE TRIBUNAL MAY BE PLEASED TO AMEND ITS ORDER IN ITA NO.935/2010 DATED 08.07.2011 BY RECTIFYING THE MIST AKE U/S 254(2) OF THE INCOME-TAX ACT, 1961, BY PASSING SUCH OTHER ORDER AS MAY BE CONSIDER FIT AND PROPER AND RENDER JUSTICE. 3. WE FIND THAT IN THE ORIGINAL CONSOLIDATED ORDER DATED 8.7.2011 PASSED IN ITA NOS. 935, 937, 939, 940, 770/MDS/2010 AND ORDER DATED 30.10.2009 PASSED IN ITA NO. 1507/MDS/10 THE TRIBUNAL DECIDED THE ISSUE OF ALLOWABILITY OF INTEREST EXPEN DITURE ON PURCHASE OF SECURITIES AS CAPITAL EXPENDITURE BY FO LLOWING THE EARLIER DECISION OF THE TRIBUNAL PASSED IN THE CASE OF THE ASSESSEE ITSELF. PAGE 4 OF 7 MP NOS. 205 TO 210//MDS/2011 CITY UNION BANK LTD. KUMBAKONAM 4. HOWEVER, NOW IT WAS POINTED OUT BY THE ASSESSEE THAT THE ISSUE STANDS DECIDED BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. KARUR VYSYA BANK LTD IN TAX CASE AP PEAL NO. 2139 OF 2008 ORDER DATED 13.7.2009 IN FAVOUR OF THE ASSESSE E. THE HON'BLE HIGH COURT HAS HELD AS UNDER: 4. THE NEXT QUESTION OF LAW IS AS TO WHETHER THE T RIBUNAL WAS RIGHT IN LAW IN HOLDING THAT THE INTEREST PAID ON CHARGE OF INVESTMENT IS ALLOWABLE AS REVENUE EXPENDITURE DISRE GARDING THE PRINCIPLE THAT THE INTEREST PAID ON CHARGE OF I NVESTMENTS CATEGORISED AS PERMANENT ARE TO BE TREATED AS CAP ITAL EXPENDITURE AND NOT AS REVENUE EXPENDITURE. AS FAR THIS QUESTION OF LAW IS CONCERNED, THE MAIN CONTENTION RA ISED BY VARIOUS PARTIES IN RESPECT OF THE GOVERNMENT SECURITI ES HELD BY THE BANKS ARE TO BE TREATED AS STOCK-IN-TRADE, C AME UP FOR CONSIDERATION BEFORE THIS COURT AND THIS COURT IN THE DECISION REPORTED IN 273 ITR 510, BY FOLLOWING THE DECISION OF THE HON'BLE SUPREME COURT REPORTED IN 240 ITR 355, HELD THAT THOSE GOVERNMENT SECURITIES, WHICH ARE HELD BY THE B ANKS ARE ALL STOCK-IN-TRADE, THE SECURITY WILL NOT BE OF PER MANENT NATURE, NOT A CAPITAL EXPENDITURE AND WHATEVER EXPEND ITURE INCURRED IN THE PURCHASE AND THE SUBSEQUENT REALIZATI ON WILL ALL BE TREATED AS REVENUE EXPENDITURE. THAT BROAD PR INCIPLE ON THE NATURE OF GOVERNMENT SECURITIES HAVE BEEN HELD TO BE PAGE 5 OF 7 MP NOS. 205 TO 210//MDS/2011 CITY UNION BANK LTD. KUMBAKONAM STOCK-IN-TRADE AND THE QUESTION NOW ARISES IN THIS C ASE IS WHETHER THE INTEREST PAID ON CHARGE OF INVESTMENTS IS ALLOWABLE AS REVENUE EXPENDITURE DISREGARDING THE PR INCIPLE THAT THE INTEREST PAID ON CHARGE OF INVESTMENTS CAT EGORISED AS PERMANENT ARE TO BE TREATED AS CAPITAL EXPENDITURE AND NOT AS REVENUE EXPENDITURE. THE DEPARTMENT CONTENTION TH AT THE INTEREST PAID ON CHARGES OF INVESTMENTS CANNOT BE T REATED AS REVENUE EXPENDITURE IS NOT NOW AVAILABLE WHEN THE VE RY GOVERNMENT SECURITIES ITSELF IS TREATED TO BE STOCK- IN-TRADE AS PER THE DECISION OF THIS COURT. WHATEVER EXPENSES I NCURRED OR INTEREST PAID THEREIN ON SUCH SHARES WAS ONLY REV ENUE EXPENDITURE AND NOT A CAPITAL EXPENDITURE IN NATURE AN D THE TRIBUNAL BY FOLLOWING THE DECISIONS OF THIS COURT REP ORTED IN 273 ITR 510 AND BY FOLLOWING THE HON'BLE SUPREME CO URT DECISION REPORTED IN 240 ITR 355 HAS ARRIVED AT THE CONCLUSION THAT THE INTEREST PAID WILL NOT BE A CAPITAL EXPEND ITURE AND ONLY A REVENUE EXPENDITURE. HENCE, WE HOLD THAT THE TRIBUNALS FINDING IS LEGAL, VALID AND CORRECT. THE REFORE, THIS QUESTION IS ALSO ANSWERED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE FOLLOWING THE ABOVE DECISIONS OF TH IS COURT AND THE HON'BLE SUPREME COURT. 5. THE LD. D.R. SHRI K.E.B. RENGARAJAN COULD NOT PO INT OUT ANY REASON AS TO WHY THE ABOVE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IS NOT APPLICABLE ON THE FACTS OF THE IN STANT CASE. PAGE 6 OF 7 MP NOS. 205 TO 210//MDS/2011 CITY UNION BANK LTD. KUMBAKONAM FURTHER, IT IS NOT IN DISPUTE THAT THE DECISIONS WH ICH ARE CONTRARY TO THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COU RT ARE MISTAKES APPARENT FROM RECORD RECTIFIABLE U/S 254(2) OF THE I.T. ACT, 1961. FOR THIS PROPOSITION, RELIANCE CAN BE PLACED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ACIT VS. SAURA SHTRA KUTCH STOCK EXCHANGE LTD [2008] 173 TAXMANN 322 [SC]. WE, THEREFORE, AMEND THE CONSOLIDATED ORDER DATED 8.7.2011 OF THE TRIBUNAL PASSED IN RESPECT OF GROUND NO. 2 OF THE APPEAL OF THE REVENUE IN ASSESSMENT YEAR 2007-08, GROUND NO. 5 IN ASSESSMENT YEAR 2002-03, GROUND NO. 2 IN ASSESSMENT YEAR 2004-05, GROUND NO. 2 IN ASSESSMENT YEAR 2005-06 AND GROUND NO. 2 IN ASSESSM ENT YEAR 2006-07 DIRECTED AGAINST THE ORDER OF THE LD. CIT(A ) IN DELETING THE ADDITION OF RS. 27,19,09,845/- IN ASSESSMENT YEAR 2007-08, RS. 28,13,95,360/- IN ASSESSMENT YEAR 2002-03, RS. 4,78 ,50,242/- IN ASSESSMENT YEAR 2004-05, RS. 9,33,17,162/- IN ASSES SMENT YEAR 2005-06, RS. 15,98,84,207/- IN ASSESSMENT YEAR 20 06-07 AND FIRST GROUND OF APPEAL IN THE ASSESSEES APPEAL IN ITA NO . 1507/MDS/2007 ORDER DATED 30.10.2009 ON ACCOUNT OF BROKEN PERIOD INTEREST AND ALLOWING THE SAME AS REVENUE EXPENDITURE AND THE DE CISION OF THE PAGE 7 OF 7 MP NOS. 205 TO 210//MDS/2011 CITY UNION BANK LTD. KUMBAKONAM TRIBUNAL IN RESPECT OF THE SAID GROUNDS ARE TO BE T REATED AS DECIDED IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE ABOVE CI TED DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT. 6. IN THE RESULT, ALL THE M.PS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16TH DECEMBER , 2011. SD/- SD/- (HARI OM MARATHA) (N.S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 16 TH DECEMBER, 2011. VL COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE