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2016 (12) TMI 1760 - AT - Income TaxDisallowing the amortization of premium on Government Securities - Held that - We find that the very same issued has been considered by the Coordinate Bench of this Tribunal in assessee s own case (supra) for the Assessment Year 2008-09. Therefore, we set aside the order of the Commissioner of Income Tax (Appeals) and remit the matter back to the file of the AO for fresh adjudication keeping in view the decision of the Coordinate Bench of this Tribunal for the Assessment Year 2008-09. Hence, this ground of appeal raised by the assessee is allowed for statistical purpose. Disallowing the amortization of loss on account of merger - Held that - CIT(A) correctly by considering the provisions of the Act disallowed the claim made by the assessee. So far as RBI guidelines with regard to the amortization of losses is concerned, in view of the specific provision provided by section 72AB of the Act, in our opinion, RBI guidelines cannot prevail over the Income Tax Act. We further observed that business losses and unabsorbed depreciation of amalgamating co-operative bank i.e. Bobbili Co-operative bank can be set off against the income of successor co-operative bank i.e. amalgamated co-operative bank (assessee) if the amalgamation is within the meaning of section 72AB. In the present case, the amalgamating company i.e. Bobbili Co-operative bank not filed return of income as required u/s 72AB. Therefore, the claim of the assessee cannot be allowed. We find that the CIT(A) has correctly decided the issue and disallowed the claim of the assessee. The issue involved in this appeal i.e. loss on account of merger has been considered by the Coordinate Bench of this Tribunal in assessee s own case for the Assessment Year 2008-09 and held that the assessee is not eligible for claim. Allowance of depreciation by treating the transaction of merger as one of goodwill acquired by the appellant - Held that - Goodwill means it is an intangible asset that arises as a result of acquisition of one company by another for a premium value. In this case, the assessee has not paid any amount to amalgamating company. The assessee has only taken losses of amalgamating company i.e. Bobbili Co-operative bank. Therefore, the assessee has not acquired any goodwill. The Ld. CIT(A) by considering the entire facts of the case has passed a detailed order by considering the provisions of law. TDS u/s 194A - Non-deduction of TDS under section 40(a)(ia) - Held that - no TDS needs to be deducted on interest paid by any cooperative society too members. In this regard, the Bench observed that the provisions of section 2(19) or section 194A(3) of the I.T. Act do not make any distinction between the cooperative societies carrying on banking business or other cooperative societies. Respectfully following the decision of Hon ble ITAT in assessee s case for Assessment Year 2007-08, the Assessing Officer is directed to delete the impugned disallowance. Disallowance of provision for deduction in Government securities - Held that - AO as well as Commissioner of Income Tax (Appeals) gave a categorical finding that the assessee has made a mere provision as per the accounting practice followed by the assessee and that the reliability is not yet crystallized during the assessment year under consideration, therefore, both the authorities below have disallowed the claim of the assessee. Even before us, the assessee is not able to establish that the claim made by the assessee is based on actual payment for the assessment year under consideration. It is also a mere provision made for the purpose of accounting practice followed by the assessee. Under these facts and circumstances of the case, we are of the opinion that the Commissioner of Income Tax (Appeals) has decided the issue correctly, hence, we find no infirmity in the order of the Commissioner of Income Tax (Appeals), which is hereby confirmed and the ground of appeal raised is dismissed. Amortization of premium paid for acquisition of HTM securities - Held that - We find in the Assessment Year 2008-09, amortization of premium on government securities has been dissolved by the Assessing Officer on the ground that it is a contingent liability. The Commissioner of Income Tax (Appeals) has confirmed the order of the Assessing Officer. On appeal, ITAT remanded the matter back to the Assessing Officer for fresh consideration. In the year under consideration, the CIT (Appeals) allowed the ground raised by the assessee by following the CBDT instruction No. 17/2008 dated 26/09/2008 and also the decision of the in the case of Rajkot District Co-operative Bank 2014 (3) TMI 110 - GUJARAT HIGH COURT directed the Assessing Officer to allow this claim. In our opinion, to maintain a consistency, the issue has to be remitted back to the Assessing Officer to consider the factual matrix of the case and decide in accordance with law. We therefore, set aside the order passed by the Commissioner of Income Tax (Appeals) and direct the Assessing Officer to consider the issue afresh
Issues Involved:
1. Disallowance of amortization of premium on Government Securities. 2. Disallowance of amortization loss on account of merger of cooperative banks. 3. Levy of interest under section 234A and 234B of the Income Tax Act. 4. Interest paid to the members of the bank. 5. Non-deduction of TDS under section 40(a)(ia) of the Act. 6. Disallowance of provision for reduction in value of Government securities held under the category "Available for Sale." Issue-wise Detailed Analysis: 1. Disallowance of Amortization of Premium on Government Securities: The assessee claimed ?28,91,278/- as amortization of premium on Government securities. The Assessing Officer (AO) disallowed this, treating it as a contingent liability. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision. On appeal, the Tribunal noted the issue had been previously remanded for fresh adjudication in the assessee's own case for Assessment Year (AY) 2008-09. Consequently, the Tribunal set aside the CIT(A)'s order and remitted the matter back to the AO for fresh adjudication in accordance with the earlier decision. 2. Disallowance of Amortization Loss on Account of Merger of Cooperative Banks: The assessee claimed amortization loss due to the merger of Bobbili Cooperative Urban Bank and Ramachandrapuram Cooperative Urban Bank. The AO disallowed the claim, and the CIT(A) upheld the decision. The Tribunal referred to its earlier decision for AY 2008-09, where it was held that the assessee was not eligible for the claim as the merged banks had not filed returns of income, thus failing to meet the conditions under section 72AB of the Act. The Tribunal dismissed the assessee's appeal, confirming the CIT(A)'s order. 3. Levy of Interest Under Section 234A and 234B of the Income Tax Act: The CIT(A) confirmed the AO's action of levying interest under sections 234A and 234B. The Tribunal noted that this ground was consequential in nature and dismissed it. 4. Interest Paid to the Members of the Bank: The assessee claimed interest paid on share capital to its members as an allowable expenditure. The AO disallowed the claim, treating it as an appropriation of profits. The CIT(A) allowed the claim, following the Tribunal's decision in the assessee's own case for AY 2007-08. The Tribunal upheld the CIT(A)'s decision, noting that the issue was covered in favor of the assessee by the earlier Tribunal decision, which was pending consideration before the High Court. 5. Non-Deduction of TDS Under Section 40(a)(ia) of the Act: The AO disallowed interest payments to members due to non-deduction of TDS. The CIT(A) directed the AO to delete the disallowance, following the Tribunal's decision for AY 2007-08, where it was held that no TDS was required on interest paid by cooperative societies to their members. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal. 6. Disallowance of Provision for Reduction in Value of Government Securities Held Under the Category "Available for Sale": The AO disallowed ?2,49,40,630/- claimed as a provision for reduction in the value of Government securities, treating it as a contingent liability. The CIT(A) upheld the AO's decision. The Tribunal noted that the provision was made as per accounting practices and RBI guidelines but was not an actual liability crystallized during the assessment year. The Tribunal found no infirmity in the CIT(A)'s order and dismissed the assessee's appeal. Conclusion: The Tribunal partly allowed the appeals filed by the assessee and the Revenue for statistical purposes, remitting some issues back to the AO for fresh consideration. The Cross Objections filed by the assessee were dismissed.
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