Vaidyanath Urban Co.op Bank Ltd.,, Beed v. Asst. Comm. of Income-tax, Aurangabad

ITA 1153/PUN/2011 | 2007-2008
Pronouncement Date: 26-11-2014 | Result: Partly Allowed

Appeal Details

RSA Number 115324514 RSA 2011
Assessee PAN AAAAV0305N
Bench Pune
Appeal Number ITA 1153/PUN/2011
Duration Of Justice 3 year(s) 2 month(s) 13 day(s)
Appellant Vaidyanath Urban Co.op Bank Ltd.,, Beed
Respondent Asst. Comm. of Income-tax, Aurangabad
Appeal Type Income Tax Appeal
Pronouncement Date 26-11-2014
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 26-11-2014
Date Of Final Hearing 25-09-2013
Next Hearing Date 25-09-2013
Assessment Year 2007-2008
Appeal Filed On 13-09-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B PUNE BEFORE: SHRI R.S. PADVEKAR JUDICIAL MEMBER AND SHRI R.K. PANDA ACCOUNTANT MEMBER ITA NO . 11 53 /PN/20 1 1 ASSESSMENT YEAR : 200 7 - 08 VAIDYANATH URBAN CO - OP. BANK LTD. PARLI (V) DISTT. - BEED VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 2 AURANGABAD (APPELLANT) (RESPONDENT) PAN NO. AAAAV0305N REVENUE BY: SHRI MAZHAR AKRAM ASSESSEE BY: SHRI S.N. PURANIK DATE OF HEARING : 24 - 11 - 2014 DATE OF PRONOUNCE MENT : 26 - 11 - 2014 ORDER PER R.S . PADVEKAR JM : - TH IS APPEAL IS FILED BY THE ASSESSEE CHALLENGING THE IMPUGNED ORDER OF THE LD. CIT(A) AURANGABAD DATED 25 - 03 - 2011 FOR THE A.Y. 200 7 - 08. THE ASSESSEE HAS TAKEN THE FOLLOWING EFFECTIVE GROUNDS IN THE APP EAL: 1. LOWER AUTHORITIES HAVE ERRED IN NOT ALLOWING BANKS CLAIM OF RS.2 65 38 325.00 FOR NON TAXABLE INTEREST FOR THE PERIOD UPTO 31/03/06 REALISED IN F.Y. 2006 - 07. SAME MAY PLEASE BE EXCLUDED FROM COMPUTATION OF INCOME OF THE BANK. 2. LOWER AUTHORITIES HAVE ERRED IN ADDING INTEREST ON RESERVE OF RS.37 37 184=00 SAME MAY PLEASE BE DELETED. 3. LOWER AUTHORITIES HAVE ERRED IN DISALLOWING AMORTIZATION OF PREMIUM ON GOVT. SECURITIES RS.6 12 119=00 SAME MAY PLEASE BE DELETED. 4. CIT(A) HAS ERRED IN RESTRICTING DEDUCTI ON U/S. 36(1)(VIIA) TO PROVISION MADE IN BOOKS. APPELLANT PRAYS FOR ALLOWING FULL DEDUCTION OF 10% ON RURAL ADVANCES AND 7.5% ON FINALLY ASSESSED INCOME BEFORE ALLOWING DEDUCTION UNDER THE CLAUSE (VIIA) OF SEC. 36(1). 2 ITA NO . 11 53 /PN/201 1 VAIDYANATH URBAN CO - OP. BANK LTD. BEED 2. THERE IS A DELAY IN FILING OF THIS APPEAL OF 110 DAYS. FOR CONDONING THE DELAY THE ASSESSEE HAS FILED AN APPLICATION WHICH IS SUPPORTED BY THE AFFIDAVIT. IT IS STATED IN THE APPLICATION THAT THE ASSESSEE WAS EARLIER REPRESENTED BY ONE CHARTERED ACCOUNTANT WHO HAS ALSO HAPPENED TO BE STAT UTORY AUDITOR OF THE BANK APPOINTED BY MAHARASHTRA CO - OPERATIVE BANK. THE IMPUGNED ORDER WAS RECEIVED BY THE ASSESSEE ON 05 - 04 - 2011 WHICH WAS FORWARDED FOR ADVICE TO THE BANKS CHARTERED ACCOUNTANT BUT REASON BEST KNOWN TO HIM THE MATTER KEPT LYING WITH H IM WITHOUT ANY ACTION. IT IS PLEADED THAT THERE IS A DELAY IN FILING THE APPEAL AS THERE WAS NO PROPER ADVICE BY THE CONCERN CHARTERED ACCOUNTANT AND HENCE DELAY MAY BE CONDONED. WE HAVE ALSO HEARD THE LD. DR ON THE CON DONATION OF THE DELAY IN FILING TH E APPEAL . LD. DR DID NOT TAKE ANY SERIOUS OBJECTION FOR CONDONING THE DELAY . WE ACCORDINGLY CONDONE THE DELAY. 3. THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT AS PER THE INSTRUCTION S OF THE ASSESSEE HE IS NOT PRESSING GROUND NOS. 1 AND 2. AS GROU ND NOS. 1 AND 2 ARE NOT PRESSED THE SAME ARE DISMISSED. HE FURTHER SUBMITS THAT SO FAR AS GROUND NO. 3 IS CONCERNED IT IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. HDFC BANK LTD. (2014) 107 DTR (BOM) 140 AS WELL AS DECISION OF THIS TRIBUNAL IN THE CASE OF BHAVANI URBAN CO - OP. BANK LTD. BEED VS. ACIT CIRCLE - 2 AURANGABAD ITA NO. 610/PN/2011 ORDER DATED 31 - 07 - 2013. THE LD. DR ALSO FAIRLY CONCEDED THE ISSUE COVERED IN FAVOUR OF THE ASSESSEE. 4. THE FACTS ARE IN NARROW COMPASS. THE ASSESSEE IS A CO - OPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF BANKING. IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS DEBITED RS.6 12 119/ - TO THE 3 ITA NO . 11 53 /PN/201 1 VAIDYANATH URBAN CO - OP. BANK LTD. BEED PROFIT AND LOSS ACCOUNT TOWARDS T HE AMORTIZATION OF PREMIUM PAID ON INVESTMENT IN THE GOVT. SECURITIES WHICH WERE HELD IN THE CATEGORY OF HELD TO MATURITY (HTM). THE SAID PREMIUM REPRESENTS THE EXCESS OF ACQUISITION COST OVER THE FACE VALUE OF THE SECURITIES WHICH IS AMORTIZED BY THE BA NK OVER THE REMAINING PERIOD OF MATURITY. IN THE OPINION OF THE ASSESSING OFFICER SECURITIES HELD UNDER THE HTM CATEGORY ARE IN THE NATURE OF CAPITAL ASSETS AND HENCE THE EXCESS PREMIUM SHOULD BE DEBITED TO THE SAID ACCOUNT AND NOT TO BE CLAIMED AS REVEN UE EXPENDITURE. HE T HEREFORE DISALLOW ED THE DEDUCTION CLAIMED BY THE ASSESSEE. 5. THE IDENTICAL ISSUE HAS COME BEFORE THE HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF HDFC BANK LTD. (SUPRA) AND HON'BLE HIGH COURT DECIDED THE ISSUE IN FAVOUR OF THE ASSE SSEE. WE ALSO FIND THAT THIS ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE ITAT PUNE IN THE CASE OF LATUR URBAN CO - OP. BANK LIMITED LATUR VS. DY. CIT CIRCLE - 3 NANDED ITA NOS. 778 & 792/PN/2011 ORDER DATED 31 - 08 - 2012. THE OPERA TIVE PART OF THE SAID DECISION IS AS UNDER: 13. SO FAR AS GROUND NO. 2 IS CONCERNED IT IS IN RESPECT OF THE DISALLOWANCES ON THE LOSS ON SALE OF SURPLUS OF RS. 14 70 000/ - . THE A.O HAS OBSERVED THAT AN AMOUNT OF RS. 14 70 000/ - IS DEBITED TO THE PROFIT & LOSS A/C ON ACCOUNT OF LOSS ON SALE OF SECURITIES. THE A.O HAS FURTHER OBSERVED THAT THE ASSESSEE IN ITS SUBMISSION HAS STATED THAT SECURITIES OF THE BANK ARE HELD UNDER THE HEAD TO MATURITY CATEGORY AND THEREFORE LOSS ARISING ON THE SALE OF INVES TMENT IS IN THE NATURE OF CAPITAL LOSS AND THEREFORE THE SAME IS NOT ALLOWABLE EXPENDITURE. THE A.O MADE THE ADDITION TO THE EXTENT OF RS. 14 70 000/ - . THE LD CIT(A) CONFIRMED THE ADDITION. 14. WE HAVE HEARD THE PARTIES. THE LD COUNSEL PLACED HIS HEAV Y 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 BANK VS. 4 ITA NO . 11 53 /PN/201 1 VAIDYANATH URBAN CO - OP. BANK LTD. BEED 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 ASSESSEE BANK WAS TO VALUE INVESTMENTS AT COST OR MARKET VALUE WHICHEVER WAS LOWER. THE ASSESSEE HAD CLAIMED THE DEPRECIATION TO THE T UNE OF RS. 11 82 35 007/ - AND THE SAID DEPRECIATION WAS CLAIMED AS A DEDUCTION WHICH WAS 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 HO NBLE HIGH COURT. THE CORE ISSUE WAS THE METHOD OF VALUATION ADOPTED BY THE ASSESSEE BANK 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). 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 SECUR ITIES. 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 Q UOTE 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 AUTHO RITIES 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 I N NATURE AND SAME IS ALLOWABLE. ACCORDINGLY GROUND NO. 2 IS ALLOWED. 6. WE THEREFORE CONFIRM THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DISMISS THE GROUND NO. 3. 5 ITA NO . 11 53 /PN/201 1 VAIDYANATH URBAN CO - OP. BANK LTD. BEED 7. WE HAVE HEARD THE PARTIES ON GROUND NO. 4. THE ASSESSING OFFICER HAS MADE THE ADDITION OF RS.13 57 240/ - OUT OF DEDUCTION U/S. 36(1)(VIIA) OF THE ACT. THE ASSESSING OFFICER HAS WORKED OUT DEDUCTION U/S. 36(1)(VIIA) @ 7.5% AT RS.16 99 044/ - AS AGAINST CLAIMED BY THE ASSESSEE OF RS.30 56 285/ - AND THE DIFFERENCE OF RS.13 57 240/ - IS ADDED AS AN EXCESS CLAIMED MADE BY THE ASSESSEE. THE ASSESSEE SUBMITTED BEFORE THE LD. CIT(A) THAT IT CLAIMED DEDUCTION U/S. 36(1)(VIIA) AT RS.3 05 65 285/ - INSTEAD OF RS.30 56 285/ - TAKEN IN COMPUTATION. IT WAS FURTHER SUBMITTED THAT OUT OF RS.3 05 65 2 85/ - DEDUCTION FOR BAD AND DOUBTFUL DEBTS IN RESPECT OF RURAL BRANCH ADVANCES IS RS.3 01 08 9000/ - AND BALANCE RS.4 56 385/ - IS ONLY TOWARD 7.5% OF NET INCOME OF ASSESSEE. IN SUM AND SUBSTANCE AS PER THE CLAIM MADE BY THE ASSESSEE BANK RS.4 56 385/ - IS O NLY TOWARD THE SAID DEDUCTION INSTEAD OF RS.30 56 285/ - TAKEN IN ASSESSMENT ORDER. THE ASSESSEE ALSO PLEADED BEFORE THE LD. CIT(A) THAT THE RECTIFICATION APPLICATION U/S. 154 IS ALSO FILED ON 13 - 01 - 2010. HE PLEADED FOR DELETING THE ADDITION. THE ASSESSE E ALSO PLEADED BEFORE THE LD. CIT(A) THAT TOTAL ALLOWABLE DEDUCTION IN RESPECT OF BAD AND DOUBTFUL DEBTS HAS COME TO ONLY RS.16 39 896/ - (7.5% OF TOTAL INCOME) AFTER ALLOWING DEDUCTION @ 10% OF ADVANCES TO RURAL BRANCHES. THE ASSESSING OFFICER HAS ALREADY ALLOWED RS.16 99 044/ - . THE ASSESSEE STATED THAT THERE WOULD BE NO ADDITION IN THIS REGARD. THE LD. CIT(A) GAVE THE DIRECTION AFTER CONSIDERING THE GROUNDS TAKEN BY THE ASSESSEE. THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO DELETE THE ADDITION IF F ACTS AND FIGURES SUBMITTED BY THE ASSESSEE ARE CORRECT AFTER VERIFICATION OF REGARD . 8. SO FAR AS GROUND TAKEN BEFORE US IS CONCERNED IT IS SOMETHING DIFFERENT WHICH IS NOT EVEN ARISING FROM THE PLEA TAKEN BEFORE THE ASS ESSING OFFICER OR LD. CIT(A). OT HERWISE ALSO THE GROUND TAKEN BY THE 6 ITA NO . 11 53 /PN/201 1 VAIDYANATH URBAN CO - OP. BANK LTD. BEED ASSESSEE IS COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE ITAT B BENCH PUNE IN THE CASE OF SHRI MAHALAXMI CO - OP. BANK LTD. KOLHAPUR VS. ITO WARD - 1(1) KOLHAPUR ITA NO. 1658/PN/2011 ORDER DATED 29 - 10 - 2013. AS THE DEDUCTION IS ONLY ALLOWABLE TO THE EXTEN T OF PROVISION MADE . WE F IND NO REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). ACCORDINGLY GROUND NO. 4 IS DISMISSED. 9. IN THE RESULT THE ASSESSEES APPEAL IS PARTLY ALLOWED. PRONOUNCED IN THE OPE N COURT ON 26 - 11 - 201 4 SD/ - SD/ - ( R.K. PANDA ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE DATED : 26 TH NOVEMBER 201 4 RK/PS COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT(A) AURANGABAD 4 THE CIT AURANGABAD 5 6 THE DR ITAT B BENCH PUNE. GUARD FILE. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE