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2015 (3) TMI 1148 - AT - Income TaxRevision under section 263 - nominal membership fees received by the assessee from such persons, who were not the members of the cooperative society, but were associated with it on account of certain transactions - Held that - The assessee had not declared the said receipts on the premise that the same were capital receipts. However, the said receipts were in the nature of nominal membership fees or entrance fees charged by the assessee from such nonexisting members of the cooperative society who had transacted with the assessee society and hence, the said receipts were to be charged as revenue receipts in the hands of the assessee. In view of the admission of the learned Authorized Representative for the assessee in this regard, we uphold the order of Commissioner in including sum of ₹ 52,960/- as income of the assessee - Decided against assessee Interest accrued on NPAs - Held that - Since the issue has already been settled, then the non-assessability of such income on accrual basis i.e. interest on NPAs, by the Assessing Officer cannot be said to be prejudicial to the interest of Revenue. However, the said principle is to be applied only in respect of non-recognition of income on accrual basis relatable to NPAs and not on the said income received by the assessee on receipt basis during the captioned assessment year. The Assessing Officer in the first round of proceedings had already made an addition of ₹ 1,62,42,236/-. in the hands of the assessee, which has been upheld by the CIT(A) and though the ground of appeal has been raised by the assessee in this regard in ITA No.237/PN/2013, but the contention of the learned Authorized Representative for the assessee before us was that the said ground of appeal is not being pressed. Once a particular addition has been made in the hands of the assessee by the Assessing Officer in the assessment order, then no further addition can be made on that basis, by way of initiation of proceedings under section 263 of the Act. Accordingly, we hold that the exercise of jurisdiction by the Commissioner under section 263 of the Act in respect of interest income relatable to NPAs is invalid as the assessment order passed by the Assessing Officer is not prejudicial to the interest of Revenue and such order even if erroneous, cannot give power to the Commissioner to initiate proceedings under section 263 of the Act. - Decided in favour of assessee Addition on amount of dividend forfeited and credited to the Reserve account - Held that - The Revenue is not in appeal against the relief allowed by the CIT(A) in assessment year 2009-10 and in view of the ratio laid down by Delhi Bench of the Tribunal in Gulshan Mercantile Urban Coop. Bank Ltd. 2011 (4) TMI 1359 - ITAT DELHI and also in view of the fact that such reversal of unclaimed dividend and credit to the Reserve Account cannot be treated as income of the assessee under section 28 of the Act, we direct the Assessing Officer to delete the addition - Decided in favour of assessee Addition on account of the transfer of creditors balance to Reserve Fund - claim of the assessee before us was that the provisions of section 41(1) of the Act were not applicable - Held that - No merit in the plea of the assessee in this regard in view of the fact that the assessee itself had transferred the credit balance of unclaimed creditors to the Reserve Accounts and the provisions of section 41(1) of the Act are clearly attracted, wherein it is provided that where any allowance of deduction has been made in the assessment for any year in respect of any loss, expenditure or trading liability incurred by the assessee and subsequently, during any previous year if any benefit has been obtained by the said person by way of remission or cessation thereof, then the amount obtained by such person or the value of benefit accruing to him, shall be deemed to be the profits and gains of business or profession. In the facts of present case also, the assessee on its own motion had transferred the credit balance due from creditors against expenses to its Reserve Fund and the provisions of section 41(1) of the Act were clearly applicable. - Decided against assessee Claim of expenditure on amortization of premium of HTM securities entitled to assessee Disallowance of audit fees under section 43B - Held that - Audit fees is not included under section 43B of the Act and hence, we find no merit in the order of Assessing Officer, in this regard. Accordingly, we direct the Assessing Officer to allow the expenditure booked on account of audit fees payable. - Decided in favour of assessee Allowability of loss on merger of Sinhagad Urban Co-operative Bank Ltd.- alternative depreciation on difference in asset and liability of bank merged - Held that - Authorized Representative for the assessee fairly admitted that the issue may be remitted back to the file of CIT(A) to examine the allowability of depreciation on intangible assets under section 32(1)(ii) of the Act, in the light of ratio laid down in The Cosmos Co-op Bank Ltd. Vs. DCIT (2014 (1) TMI 1696 - ITAT PUNE ) wherein held difference paid by the assessee in excess of liabilities over the realizable values of the assets taken over represent payment for any business or commercial rights of similar nature and are liable to be construed as intangible asset, contemplated under section 32(1)(ii) of the Act. Accordingly, it was held that the assessee is entitled to the allowance of depreciation in terms of section 32(1)(ii) of the Act. In view thereof, we restore this issue back to the file of CIT(A) to re-adjudicate the issue
Issues Involved:
1. Jurisdiction under section 263 of the Income Tax Act. 2. Addition of nominal membership fees. 3. Taxability of interest on Non-Performing Assets (NPA). 4. Forfeiture of dividend and its taxability. 5. Transfer of creditors' balances to Reserve Fund. 6. Amortization of premium on government securities. 7. Disallowance of audit fees under section 43B. 8. Deduction under section 36(1)(viia). 9. Loss on merger of banks and depreciation on intangible assets. Issue-Wise Detailed Analysis: 1. Jurisdiction under section 263 of the Income Tax Act: The Commissioner invoked jurisdiction under section 263 due to errors in the assessment order, specifically regarding nominal membership fees and interest on NPAs. The Tribunal upheld the Commissioner's decision on nominal membership fees but found no merit in the exercise of jurisdiction regarding interest on NPAs, citing precedents that interest on NPAs, as per RBI guidelines, should not be included as income unless received. 2. Addition of nominal membership fees: The nominal membership fees received by the cooperative society were initially considered capital receipts by the assessee. However, the Tribunal upheld the Commissioner's view that these fees should be treated as revenue receipts, as admitted by the assessee's representative. 3. Taxability of interest on Non-Performing Assets (NPA): The Tribunal referenced the Pune Bench decision in ACIT Vs. Osmanabad Janta Sah. Bank Ltd., which held that interest on NPAs should not be included as income based on RBI guidelines. The Tribunal concluded that the Commissioner's exercise of jurisdiction under section 263 was invalid for the interest on NPAs, as the assessment order was not prejudicial to the Revenue. 4. Forfeiture of dividend and its taxability: The Tribunal found that unclaimed dividends transferred to the Reserve Fund should not be treated as income under section 28 or section 41(1) of the Act. The addition of Rs. 40,02,265/- was deleted, following the CIT(A)'s decision for the previous year and the Delhi Tribunal's ruling in Gulshan Mercantile Urban Coop. Bank Ltd. 5. Transfer of creditors' balances to Reserve Fund: The Tribunal upheld the addition of Rs. 1,88,877/- under section 41(1) of the Act, as the transfer of unclaimed creditors' balances to the Reserve Fund was deemed a cessation of liability. Similarly, the addition of Rs. 20,547/- for excess cash transferred to the Reserve Fund was confirmed. 6. Amortization of premium on government securities: The Tribunal allowed the claim of Rs. 6,12,119/- for amortization of premium on HTM securities, following the Pune Bench decision in Bhavani Urban Co-operative Bank Ltd. and the Bombay High Court ruling in CIT Vs. HDFC Bank Ltd., which recognized such amortization as an allowable business expenditure. 7. Disallowance of audit fees under section 43B: The Tribunal directed the Assessing Officer to allow the audit fees of Rs. 1,19,277/-, as section 43B does not apply to audit fees, which are not listed under the specified heads in the section. 8. Deduction under section 36(1)(viia): The Tribunal remitted the issue back to the Assessing Officer to allow the correct deduction under section 36(1)(viia) after providing a reasonable opportunity for the assessee to present its case. 9. Loss on merger of banks and depreciation on intangible assets: The Tribunal remitted the issue of allowing the loss on the merger of banks and depreciation on intangible assets back to the CIT(A). The Tribunal referenced the Pune Bench decision in The Cosmos Co-op Bank Ltd., which allowed depreciation on intangible assets acquired during the merger, such as licenses, customer base, and operational branches, under section 32(1)(ii). Conclusion: The Tribunal provided a balanced judgment, upholding some of the Commissioner's decisions and remitting others for further consideration, ensuring adherence to legal precedents and guidelines. The appeals were partly allowed, reflecting a thorough and fair analysis of each issue.
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