DCIT, Circle-1,, Sangli v. Hutatma Sah. Bank Ltd.,, Sangli

ITA 389/PUN/2013 | 2009-2010
Pronouncement Date: 29-10-2013 | Result: Dismissed

Appeal Details

RSA Number 38924514 RSA 2013
Assessee PAN AAAAH0140B
Bench Pune
Appeal Number ITA 389/PUN/2013
Duration Of Justice 8 month(s) 20 day(s)
Appellant DCIT, Circle-1,, Sangli
Respondent Hutatma Sah. Bank Ltd.,, Sangli
Appeal Type Income Tax Appeal
Pronouncement Date 29-10-2013
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 29-10-2013
Assessment Year 2009-2010
Appeal Filed On 08-02-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV JUDICIAL MEMBER AND SHRI R.K. PANDA ACCOUNTANT MEMBER ITA NO. 389/PN/2013 (ASSTT.YEAR : 2009-10) ACIT CIRCLE-1 SANGLI .. APPELLANT VS. HUTATMA SAHAKARI BANK LTD. AT: WALWA TAL : WALWA SANGLI. PAN NO. AAAAH0140B .. RESPONDENT APPELLANT BY : SHRI WALIMBE RESPONDENT BY : SHRI M.K. KULKARNI DATE OF HEARING : 24-10-2013 DATE OF PRONOUNCEMENT : 29-10-2013 ORDER PER R.K. PANDA AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 06-11-2012 OF THE CIT(A) KOLHAPUR RELATING TO ASS ESSMENT YEAR 2009-10. 2. GROUNDS RAISED BY THE REVENUE ARE AS UNDER : 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN ALLOWING AMORTIZATION OF PREMIUM PA ID ON GOVERNMENT SECURITIES BY THE ASSESSEE OF RS.21 47 607/-. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE LD. CIT(A) ERRED IN ALLOWING AMORTIZATION OF PREMIUM PA ID ON GOVERNMENT SECURITIES PURCHASED BY THE ASSESSEE. ALL CAPITAL ASSETS AR E TO BE VALUED AT COST ONLY AND NO PART THEREOF CAN BE CLAIMED AS RE VENUE EXPENDITURE IN COMPUTING TOTAL INCOME. THIS PRINCIPLE HAS BEEN UPHE LD BY THE HONBLE SUPREME COURT IN THE CASE OF VIJAY BANK LTD. VS. ADDL . CIT (187 ITR 541). 3. AFTER HEARING BOTH THE SIDES WE FIND THAT THE A O DISALLOWED AN AMOUNT OF RS.21 47 607/- ON ACCOUNT OF AMORTIZATION OF PREMIUM PAID ON GOVERNMENT SECURITIES DEBITED TO THE P& L ACCOUNT. WE FIND THE LD. CIT(A) FOLLOWING HIS ORDER IN THE CASE OF KALLAPPAN NA AWADE ICHALKARANJI 2 JANATA SAHAKARI BANK LTD. FOR A.Y. 2008-09 DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND DELETED THE DISALLOWANCE. WE FIND THE TRIBUNAL IN THE CASE OF DCIT VS. KALLAPPANNA AWADE ICHALKARANJI JANATA S AHAKARI BANK LTD. VIDE ITA NO.449/PN/2012 ORDER DATED 05-8-2013 FOR A .Y. 2008-09 HAS DISMISSED THE APPEAL FILED BY THE REVENUE BY HOLDIN G AS UNDER : 10. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A ) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSI DERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND AN IDENTICAL ISSUE H AD COME UP BEFORE THE TRIBUNAL IN THE CASE OF NAHSIK MERCHANT COOPERATIVE BANK LTD. (SUPRA). WE FIND THE TRIBUNAL HAS DISCUSSED THE ISSUE AND DISMISSED THE GROUNDS RAISED BY THE REVENUE BY HOLDING AS UNDER : 4. AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATERIAL ON RECORD WE FIND THAT WITH THE ADVENT OF SECTION 80P(4) W.E.F . A.Y 2007-08 HAS CLOSED THE DOORS FOR COOPERATIVE BANKS FOR CLAIMING THE BENEFIT OF DEDUCTION U/S.80P(2)(A)(I) FROM THIS TOTAL INCOME. HOWEVER THE COOPERATIVE SOCIETY SHOULD NOW BE ENTITLED TO BE ASSESSED AS NORMAL BANKING COMPANY. THE CLAUSE (4) INSERTED IN SECTION 8 0P HAS TAKEN AWAY THE BENEFIT OF THE ERSTWHILE DEDUCTION AVAILABL E TO COOPERATIVE SOCIETY IN CARRYING ON BUSINESS OF BANKING OR PROVIDING CREDIT FACILITY TO ITS MEMBERS. THE NEW CLAUSE (4) INSERTED BY THE FINA NCE ACT 2006 W.E.F. 01-04-2007 READS AS UNDER : ' THE PROVISION OF THE SECTION WAS NOT IN RELATION TO ANY COOPERATIVE BANK OTHER THAN AGRICULTURAL CREDIT SOCIETY OR PRIMA RY COOPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK'. 5. THE INTENTION OF THE PROVISION MAY BE DERIVED MO RE PRECISELY FROM RELEVANT PARA 166 OF THE BUDGET SPEECH WHICH STA TED THAT : 'CO- OPERATIVE BANKS LIKE ANY OTHER BANK ARE LENDING IN STITUTIONS AND SHOULD PAY TAX ON THEIR PROFITS PRIMARY AGRICULTURAL CREDIT SOCIETIES (PACS) AND PRIMARY COOPERATIVE AGRICULTURAL AND RUR AL DEVELOPMENT BANK (PCARDB) STAND ON A SPECIAL FOOTING AND WILL CONTINUE TO BE EXEMPT UNDER SECTION 80P OF THE INCOM E TAX ACT. HOWEVER I PROPOSE TO EXCLUDE ALL OTHER CO-OPERATIVE BANKS FROM THE SCOPE OF THAT SECTION'. ACCORDINGLY SECTION 80P IS TO BE AMENDED TO GIVE EFFECT TO THE ABOVE PROPOSAL. IT IS ALSO PROPOSED TO AMEND SECTION 2(24) TO PROVIDE THAT PROFITS AND GAINS OF BUS INESS OF BANKING (INCLUDING PROVIDING CREDIT FACILITIES) CARR IED ON BY A CO- OPERATIVE SOCIETY WITH ITS MEMBERS SHALL BE INCLUDED IN THE DEFINITION OF 'INCOME' (WITH EFFECT FROM 1ST APRIL 2007)'. 6. COOPERATIVE BANK UNLIKE OTHER COMMERCIAL BANKS ARE SUBJECTED TO DUAL CONTROL FROM BOTH RBI AS WELL AS FRO M STATE COOPERATIVE DEPARTMENT. THE ACCOUNTING TREATMENT FO R A COOPERATIVE BANK IS THEREFORE A RESULT OF GUIDELINES F ROM BOTH THE CONTROLLING AUTHORITIES. ORDINARILY A DEDUCTION IS NO T AVAILABLE TO AN ASSESSEE UNLESS SPECIFICALLY PROVIDED UNDER THE ACT. THIS IS IRRESPECTIVE OF ACCOUNTING TREATMENT PROVIDED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS. BUT AT THE SAME TIME IT WAS WELL SETT LED THAT DEDUCTION EXPRESSLY MENTIONED UNDER THE ACT ARE NOT E XHAUSTIVE AND PROFIT IS TO BE DERIVED ACCORDING TO ORDINARY CO MMERCIAL 3 PRINCIPLES. AS PER THE EXTANT RBI GUIDELINES DATED 01 -07-2009 THE INVESTMENT PORTFOLIO OF THE BANKS IS REQUIRED TO BE C LASSIFIED UNDER 3 CATEGORIES VIZ. HELD THE MATURITY HTM) HELD FOR TRADING (HFT) AND AVAILABLE FOR SALE (AFS). THE VALUE OF EACH KIN D OF INVESTMENT IS TO BE DONE IN THE FOLLOWING MANNER: SR.NO. CLASSIFICATION VALUATION NORMS OF INVESTMENT. 1. HTM THESE ARE CARRIED AT ACQUISITION COST UNLESS THE COST IS MORE THAN THE FACE VALUE IN WHICH CASE THE PREMIUM SHOULD BE AMORTISED OVER THE PERIOD REMAINING TO MATURITY. THE PREMIUM IS REQUIRED TO BE AMORTISED OVER THE PERIOD REMAINING T O MATURITY. THIS APART ANY PERMANENT DIMINUTION IN VALUE SHALL F V SHALL GO ON TO REDUCE COST OF THE INVESTMENT. 2. AFS THE INDIVIDUAL SCRIPS IN THE AVAILABLE FOR SA LE CATEGORY WILL BE MARKED TO MARKET AT QUARTERLY OR AT MORE FR EQUENT INTERVALS. THESE INVESTMENTS ARE CONSIDERED TO FORM STOCK-IN-TRADE OF A BANK AND THEREFORE ARE TO BE VALUED AT COST OR NRV WHICH EVER IS LESS. FALL IN VALUE BELOW COST THEREFORE IS TO BE PROVIDED IMM EDIATELY HOWEVER ANY NET APPRECIATION IN VALUE IS IGNORED AND NOT RECOGNIZED AS INCOME ON THE BASIS OF CONSERVATISM. 3. HFT THE INDIVIDUAL SCRIPS IN THE HELD FOR TRADIN G CATEGORY WILL BE MARKED TO MARKET AT MONTHLY OR AT MORE FREQ UENT INTERVALS AND PROVIDED FOR AS IN THE CASE OF THOSE IN THE AVAILA BLE FOR SALE CATEGORY. 7. IN PARA (VII) OF THE CBDT INSTRUCTION NO.17 OF 2 008 DATED 26.11.2008 ON 'ASSESSMENT OF BANK - CHECK LIST FOR DE DUCTION STATES AS UNDER: 'AS PER RBI GUIDELINES DATED I6TH OCTOBER 2000 THE INVESTMENT PORTFOLIO OF THE BANKS IS REQUIRED TO BE CL ASSIFIED UNDER THREE CATEGORIES VIZ. HELD TO MATURITY (HTM) HELD FOR TRADING (HFT) AND AVAILABLE FOR SALE (AFS). INVESTM ENTS CLASSIFIED UNDER HTM CATEGORY NEED NOT BE MARKED TO M ARKET AND ARE CARRIED AT ACQUISITION COST UNLESS THESE ARE MOR E 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 TH E BANK THE DEPRECIATION/ APPRECIATION IS TO BE AGGREGATED SC RIP 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. THE ITAT MUMBAI BENCH IN THE CASE OF ACIT VS. T HE BANK OF RAJASTHAN LTD. (2011) TIOL-35-ITAT-MUMBAI HAS HELD T HAT IN CASE OF BANKS THE PREMIUM PAID IN EXCESS OF FACE VALUE OF INVESTMENTS CLASSIFIED UNDER HTM CATEGORY WHICH HAS BEEN AMORTISED OVER THE PERIOD TILL MATURITY IS ALLOWABLE AS REVENUE EXPENDIT URE SINCE THE CLAIM IS AS PER RBI GUIDELINES AND CBDT ALSO HAS DIRECTE D TO ALLOW SUCH PREMIUM. IT HAS ALSO BEEN HELD IN THE CASE OF CATH OLIC SYRIAN BANK LTD. VS. ACIT THAT AMORTIZATION ON PURCHASE OF G OVERNMENT SECURITIES WAS MADE AS PER PRUDENTIAL NORMS OF THE RBI AND SAME WAS ALLOWABLE DEDUCTION. IN VIEW OF ABOVE ASSESSEE WA S JUSTIFIED IN CONTENDING FOR AMORTIZATION OF PREMIUM PAID IN EXCE SS OF FACE VALUE OF SECURITIES HELD TO MATURITY (HTM) CATEGORY OR PERI OD REMAINING TILL MATURITY WAS FOUND REASONABLE BY THE CIT(A). AC CORDINGLY 4 ADDITION OF RS.17 91 659/- MADE BY THE ASSESSING OFFICER BY DISALLOWING AMOUNT TOWARDS AMORTIZATION OF GOVERNMENT SECURITIES (HMT) WAS DELETED. THIS REASONED FACTUAL AND LEGAL FI NDING OF THE CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOL D THE SAME. 9. AS A RESULT THE APPEAL FILED BY THE REVENUE IS DISM ISSED. 10.1 RESPECTFULLY FOLLOWING THE DECISION OF THE COORD INATE BENCH OF THE TRIBUNAL AND IN ABSENCE OF ANY CONTRARY MATERIAL BRO UGHT TO OUR NOTICE AGAINST THE ABOVE CITED DECISION WE FIND NO INFIRMITY IN THE ORDER OF THE LD.CIT(A) DELETING THE ADDITION. ACCORDINGLY THE ORDER OF THE LD.CIT(A) IS UPHELD AND THE GROUNDS RAISED BY THE REVENUE ARE DISM ISSED. 3.1 SINCE THE LD. CIT(A) WHILE ALLOWING THE CLAIM O F THE ASSESSEE HAS FOLLOWED THE DECISION IN THE CASE OF KALLAPPANNA AW ADE ICHALKARANJI JANATA SAHAKARI BANK LTD. (SUPRA) WHICH HAS BEEN UPHELD BY THE TRIBUNAL AND SINCE NOTHING CONTRARY WAS BROUGHT TO OUR NOTICE AG AINST THE ORDER OF THE TRIBUNAL THEREFORE WE FIND NO INFIRMITY IN THE OR DER OF THE CIT(A) DELETING THE DISALLOWANCE. ACCORDINGLY THE ORDER OF LD.CIT (A) IS UPHELD AND THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 4. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 29 TH DAY OF OCTOBER 2013. SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PA NDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED : 29 TH OCTOBER 2013 SATISH COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT(A) KOLHAPUR 4. THE CIT KOLHAPUR 5. D.R. B BENCH PUNE 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE