Asst. Commissioner of Income Tax, Circle-1, Nashik v. The Nashik Merchant Cooperative Bank Ltd, Nashik

ITA 950/PUN/2013 | 2009-2010
Pronouncement Date: 30-04-2014 | Result: Dismissed

Appeal Details

RSA Number 95024514 RSA 2013
Assessee PAN AAAAT3324K
Bench Pune
Appeal Number ITA 950/PUN/2013
Duration Of Justice 11 month(s) 28 day(s)
Appellant Asst. Commissioner of Income Tax, Circle-1, Nashik
Respondent The Nashik Merchant Cooperative Bank Ltd, Nashik
Appeal Type Income Tax Appeal
Pronouncement Date 30-04-2014
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 30-04-2014
Assessment Year 2009-2010
Appeal Filed On 02-05-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV JUDICIAL MEMBER AND SHRI G.S. PANNU ACCOUNTANT MEMBER ITA NO.950/PN/2013 (A.Y: 2009-10) DCIT CIRCLE-1 NASHIK APPELLANT VS. THE NASHIK MERCHANT CO-OPERATIVE BANK LTD. A-16 INDUSTRIAL ESTATE BABUBHAI RATHI CHOWK SATPUR NASHIK 422007 PAN: AAAAT3324K RESPONDENT APPELLANT BY : SHRI P.L. P ATHADE RESPONDENT BY : SHRI ABH AY AUCHAT DATE OF HEARING: 25.04.2014 DATE OF ORDER : 30.04.2014 ORDER PER SHAILENDRA KUMAR YADAV J.M: THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX(APPEAL)-I [IN SHORT CIT(A)] NASHIK DATED 27.02.2013 FOR A.Y. 2009-10 ON THE FO LLOWING GROUNDS. 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD.CIT(A)-I NASHIK WAS JUSTIFIED IN DELE TING THE ADDITION OF RS.3 73 600/- MADE ON ACCOUNT OF CLAI MING EXPENDITURE TOWARDS AMORTIZATION OF PREMIUM ON INVESTMENT HELD TILL MATURITY. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD.CIT(A)-I NASHIK WAS JUSTIFIED IN DE LETING DISALLOWANCE OF RS.10 60 882/- ON ACCOUNT OF EXPENS ES CLAIMED UNDER THE HEAD EDUCATION FUND. 2 3. THE APPELLANT PRAYS THE ORDER OF THE ASSESSING OFFI CER MAY BE RESTORED. 4. THE APPELLANT PRAYS TO ADDUCE SUCH FURTHER EVIDENCE TO SUBSTANTIATE HIS CASE. 5. THE APPELLANT PRAYS LEAVE TO ADD ALTER CLARIFY A MEND AND OR WITHDRAW ANY GROUNDS OF APPEAL AS AND WHEN T HE OCCASION DEMANDS. 2. THE ASSESSEE IS A CO-OPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF BANKING I.E. ACCEPTING DEPOSITS FROM ME MBERS AND LENDING THE SAME AND EARNING INTEREST INCOME FROM M EMBERS AND ALSO EARNING INCOME ON INVESTMENT. THE ASSESSEE FI LED RETURN OF INCOME DECLARING TOTAL INCOME OF 17 03 46 620/- ON 25.09.2009. THE ASSESSING OFFICER SCRUTINIZED THE RETURN OF INCOME AND ASSESSED THE INCOME OF ASSESSEE AT 17 31 29 110/- VIDE IMPUGNED ASSESSMENT ORDER. AMONG OTHERS THE ASSESSING OFFICER MADE ADDITION OF 3 73 600/- ON ACCOUNT OF AMORTIZATION OF GOVT. SECURITIES AND 10 60 822/- ON ACCOUNT OF EDUCATION FUND. 3. THE MATTER WAS CARRIED BEFORE FIRST APPELLATE AU THORITY WHEREIN THE VARIOUS CONTENTIONS WERE RAISED ON BEHA LF OF ASSESSEE. HAVING CONSIDERED THE SAME THE CIT(A) H AS GRANTED RELIEF ON BOTH ACCOUNTS. THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF REVENUE. ON THE OTHER HAND THE LEARN ED AUTHORIZED REPRESENTATIVE HAS SUPPORTED THE ORDER OF CIT(A) ON THE ISSUE. 4. AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND MA TERIAL ON RECORD REGARDING DISALLOWANCE OF AMORTIZATION OF PR EMIUM ON GOVT. SECURITIES OF 3 73 600/- WE FIND THAT THE ASSESSING OFFICER FROM THE PROFIT & LOSS ACCOUNT OF BANK OBS ERVED THAT AN AMOUNT OF 3 73 600/- WAS DEBITED UNDER THE HEAD INVESTMENT PREMIUM AMORTIZATION. THE DETAILS IN RESPECT OF IT S ALLOWABILITY WERE CALLED FOR DURING THE ASSESSMENT PROCEEDINGS. THE 3 AUTHORIZED REPRESENTATIVE ON BEHALF OF ASSESSEE HAS SUBMITTED THAT AN AMOUNT OF 3 73 600/- HAS BEEN CLAIMED AS DEDUCTION FOR AMORTIZATION OF GOVT. SECURITIES PREMIUM WHICH HAS BEEN HELD TO MATURITY (HTM) BY BANK OF SUCH SECURITIES. THE ASSESSING OFFICER REJECTED THE CONTENTION OF ASSESS EE AND MADE DISALLOWANCE IN QUESTION. WE FIND THAT THE MASTER CIRCULAR ON INVESTMENT BY PRIMARY (URBAN) COOPERATIVE BANKS (UP DATED UP TO 30.06.2007) ISSUED BY RBI IS RELEVANT FOR DECIDING THE ISSUE AT HAND. THE RELEVANT PORTION OF THE CIRCULAR IS REPR ODUCED BELOW: '16. VALUATION OF INVESTMENTS 16.1 VALUATION STANDARDS 16.1.1 INVESTMENTS CLASSIFIED UNDER 'HELD TO MATURI TY' CATEGORY NEED NOT BE MARKED TO MARKET AND WILL BE C ARRIED AT ACQUISITION COST UNLESS IT IS MORE THAN THE FACE VALUE IN WHICH CASE THE PREMIUM SHOULD BE AMORTIZED OVER THE PERIOD REMAINING TO MATURITY. 16.1.2 THE INDIVIDUAL SCRIP IN THE 'AVAILABLE FOR S ALE' CATEGORY WILL BE MARKED TO MARKET AT THE YEAR-END O R AT MORE FREQUENT INTERVALS. THE BOOK VALUE OF THE INDI VIDUAL SECURITIES WOULD NOT UNDERGO ANY CHANGE AFTER THE REVALUATION. 16.1.3 THE INDIVIDUAL SCRIP IN THE 'HELP FOR TRADIN G' CATEGORY WILL BE MARKED TO MARKET AT MONTHLY OR AT MORE FREQUENT INTERVALS. THE BOOK VALUE OF INDIVIDUAL SE CURITIES IN THIS CATEGORY WOULD NOT UNDERGO ANY CHANGE AFTER MA RKING TO MARKET. NOTE:- SECURITIES UNDER AFS AND HFT CATEGORIES SHAL L BE VALUED SCRIP WISE AND DEPRECIATION / APPRECIATION S HALL BE AGGREGATED FOR EACH CLASSIFICATION AS INDICATED AT PARA 15.6 ABOVE SEPARATELY FOR AFS AND HFT. NET DEPRECIATION IF ANY SHALL BE PROVIDED FOR. NET APPRECIATION IF ANY SH OULD BE IGNORED. NET DEPRECIATION REQUIRED TO BE PROVIDED F OR IN ANY ONE CLASSIFICATION SHOULD NOT BE REDUCED ON ACCOUNT OF NET APPRECIATION IN ANY OTHER CLASSIFICATION. SIMILARLY NET DEPRECIATION FOR ANY CLASSIFICATION IN ONE CATEGORY SHOULD NOT BE REDUCED FROM APPRECIATION IN SIMILAR CLASSIF ICATION IN ANOTHER CATEGORY.' 4 FURTHER IT HAS BEEN LAID DOWN BY CBDT VIDE INSTRUCT ION NO. 17 OF 2008 DATED 26/11/2008 VIDE PARA 2(VII) AS UND ER. '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). INVESTM ENTS CLASSIFIED UNDER HTM CATEGORY NEED NOT BE MARKED TO MARKET AND ARE CARRIED AT ACQUISITION COST UNLESS T HESE ARE MORE THAN THE FACE VALUE IN WHICH CASE THE PREMIUM SHOULD BE AMORTIZED OVER THE PERIOD REMAINING TO MA TURITY. 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 L ATEST GUIDELINES OF THE RBI MAY BE REFERRED TO FOR ALLOWI NG ANY SUCH CLAIMS. 5. THE MUMBAI BENCH IN THE CASE OF ACIT VS. BANK OF RAJASTHAN LTD. (2011) TIOL 35 ITAT (MUM) HAS FOLL OWED THE ABOVE INSTRUCTION OF CBDT. THE ABOVE DECISION LAID DOWN THAT IN THE CASE OF BANK PREMIUM PAID IN EXCESS OF THE FACE VALUE OF INVESTMENTS CLASSIFIED UNDER HTM CATEGORY WHICH HAS BEEN AMORTIZED OVER A PERIOD TILL MATURITY IS ALLOWABLE AS REVENUE EXPENDITURE SINCE THE CLAIM IS AS PER RBI GUIDELINE S AND CBDT HAS ALSO DIRECTED TO ALLOW THE SAID PREMIUM. IN VI EW OF ABOVE CIRCULAR INSTRUCTION AND GUIDELINES ISSUED BY THE CBDT AND RBI AMORTIZATION OF PREMIUM PAID ON GOVERNMENT SECURITI ES IS ALLOWABLE EXPENDITURE. IN VIEW OF ABOVE THE CIT(A ) WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF 3 73 600/-. WE UPHOLD THE SAME. 6. THE NEXT ISSUE IS WITH REGARD TO ADDITION OF 10 60 882/- AS CONTRIBUTION TO EDUCATION FUND. THE ASSESSING OFFI CER OBSERVED FROM THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT OF ASSESSEE THAT IT HAS SHOWN AN AMOUNT OF 10 60 882/- AS PAYABLE ON ACCOUNT OF EDUCATION FUND. IT WAS FURTHER OBSERVED THAT TH E EXPENDITURE CLAIMED ON ACCOUNT OF EDUCATION FUND WAS NOT RELATE D WITH THE BUSINESS OF ASSESSEE BANK THEREFORE THE ASSESSEE WAS REQUIRED 5 TO EXPLAIN AS TO WHY AN AMOUNT OF 10 60 882/- MAY NOT BE DISALLOWED ON ACCOUNT OF EDUCATION FUND. THE ASSES SEE VIDE LETTER DATED 04.11.2011 AND 11.11.2011 HAS FURNISHE D THE EXPLANATION ALONG WITH COPY OF PAID RECEIPT DATED 2 2.12.2009 INTER ALIA STATED THAT AS PER PROVISIONS OF SECTIO N 43B OF I.T. ACT COVERS ANY TAX DUTY CESS FEE BY WHATEVER NAME C ALLED UNDER ANY LAW FOR THE TIME BEING IN FORCE. THE EDUCATION FUND IS CONTRIBUTION OF EDUCATION MADE BY THE MULTI-STATE C OOPERATIVE SOCIETY TO CENTRAL GOVERNMENT. THE AMOUNT PAID IS CONTRIBUTED TO THE EDUCATION FUND SET UP BY GOVT. OF INDIA. THUS IT IS NOT ANY TAX DUTY CESS OR FEE AND HENCE SECTION 43B IS NOT APPLICABLE TO THIS PAYMENT. HOWEVER THE ASSESSING OFFICER DID N OT ACCEPT THIS CONTENTION OF ASSESSEE AND DISALLOWED THIS EXPENDIT URE AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 7. THE MATTER WAS CARRIED BEFORE FIRST APPELLATE AU THORITY WHEREIN THE VARIOUS CONTENTIONS WERE RAISED ON BEHA LF OF ASSESSEE. HAVING CONSIDERED THE SAME THE CIT(A) G RANTED RELIEF TO THE ASSESSEE. THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF REVENUE INTER ALIA REQUESTED TO SET ASIDE THE ORDER OF CIT(A) ON THE ISSUE AND RESTORE TO THAT OF ASSESSING OFFICER. ON THE OTHER HAND THE LEARNED AUTHORIZED REPRESENTATIVE HAS SUP PORTED THE ORDER OF CIT(A) ON THE ISSUE. 8. AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND MA TERIAL ON RECORD WE FIND THAT THE ASSESSEE IS A COOPERATIVE BANK HAS PAID CONTRIBUTION TO THE EDUCATION FUND OF STATE GOVERNM ENT AS PER GUIDELINES OF COMMISSION OF COOPERATIVE DEPARTMENT. THE CONTRIBUTION FUND IS MANDATORY ON THE PART OF EVERY COOPERATIVE BANK REGISTERED IN THE STATE OF MAHARASHTRA. THE A SSESSEE HAS DEMONSTRATED THAT AS PER COOPERATIVE SOCIETY ACT A NY ORDER OR INSTRUCTION ISSUED BY THE GOVT. OF MAHARASHTRA IS M ANDATORY ON THE PART OF COOPERATIVE SOCIETY / COOPERATIVE BANK. SINCE THE 6 BANK HAS TO WORK UNDER THE CONTROL OF COMMISSIONER OF COOPERATION MAHARASHTRA. SO THE ORDER ISSUED BY THE COMMISSIONER IS OBLIGATORY ON THE BANK. IN VIEW OF ABOVE THE CIT(A) RIGHTLY HELD THAT THE CONTRIBUTION PAID BY B ANK IS A BUSINESS EXPENDITURE WHOLLY EXCLUSIVELY INCURRED FO R THE PURPOSE OF BUSINESS AND ACCORDINGLY ALLOWABLE U/S.37(1) OF THE ACT. THIS REASONED FINDING OF CIT(A) WHEREBY HE DELETED THE ADDITION OF 10 60 882/- MADE ON ACCOUNT OF CONTRIBUTION TO THE EDUCATION FUND AS STATED ABOVE NEEDS NO INTERFERENCE FROM OU R SIDE. WE UPHOLD THE SAME. 9. IN THE RESULT APPEAL FILED BY THE REVENUE IS DI SMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE DAY 30 TH OF APRIL 2014. SD/- SD/- (G.S. PANNU) (SHAILENDRA KUMAR YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE DATED: 30 TH APRIL 2014 GCVSR COPY TO:- 1) DEPARTMENT 2) ASSESSEE 3) THE CIT(A)-I NASHIK 4) THE CIT-I NASHIK 5) THE DR A BENCH I.T.A.T. PUNE. 6) GUARD FILE BY ORDER //TRUE COPY// SENIOR PRIVATE SECRETARY I.T.A.T. PUNE