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TMI Blog2015 (1) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that:- As decided in assessee’s own case for the earlier assessment year, wherein it has been held that the investment in the unquoted shares is to be treated as a part of its stock-in-trade and, accordingly, valued at cost or market value, whichever is less - the AO's objection with regard to the non-availability of the market quotation, the shares being unquoted, as also qua non write off of the relevant investment in books, the same being liable for a valuation, as stock-in-trade, on each valuation date, would not hold - however, the fact that the balance-sheets were uncommunicable or the companies were defunct, which only would enable the valuation at nil as against break-up value, the assessee claiming loss for the entire book value, would need to be established by it – thus, there was no infirmity in the order – Decided against revenue. Addition u/s 36(1)(viia) - Deduction of provision for bad debts - Held that:- Following the decision in Commissioner of Income Tax Versus Lord Krishna Bank Ltd. [2010 (10) TMI 860 - Kerala High Court] - the definition clause does not exclude the literal meaning of rural branch which necessarily excludes urban areas - if the assessee's ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e find that this issue is covered in favour of the assessee by the order of the Tribunal in assessee s own case for assessment years 2000-2001 to 2003-2004. The Tribunal vide its order in ITA Nos.9 10/Coch/2011 dated 18.09.2012 decided the issue in favour of the assessee by following the judgment of the Hon ble Kerala High Court in the case of Lord Krishna Bank and Nedungadi Bank. The observation of the Tribunal reads as follows:- 4. We have considered the rival submissions and also perused the material available on record. The only question arises for consideration is whether the notional loss said to be suffered by the taxpayer on revaluation of the securities is allowable as deduction or not. This issue was considered by the jurisdictional High Court in Commissioner of Income-tax vs. Nedungadi Bank Ltd. (supra)(264 ITR 545) and after considering the judicial pronouncements on the subject found that security held by the bank constitute their stock in trade or investment. Consequently, the loss claimed by the bank in valuation of their securities should be allowed as deduction in computing the taxable profit. In view of this judgment of the Kerala High Court, the loss suffer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formula for computation of market value of unquoted securities and he has no case that the RBI guidelines for valuation is irrational. So much so, we feel the Tribunal rightly upheld assessee s claim for valuation of unquoted Government securities based on RBI guidelines . 6. The RBI issued guidelines to value to unsecured shares on the basis of YTM, i.e., yield to maturity method adopted for valuation of securities. The Kerala High Court has also found that YTM rates have been put out by the PDAI/FIMMDA at periodical intervals. Therefore, when the taxpayer revalued the asset on the basis of the guideline issued by the RBI at realizable value i.e. YTM method suggested by RBI, the taxing authority cannot find fault with taxpayer. As observed by Kerala High Court, the assessing authority has not come out with any suggestion/formula for computation of market value of unquoted shares. It is also not the case of the revenue that the guideline issued by the RBI for valuation is irrational. In these facts and circumstances, this Tribunal is of the considered opinion that the law laid down by the jurisdictional High Court in the case of Nedungadi Bank Ltd. (supra) and Lord Krishna Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld need to be established by it; the asssesse itself claiming the value of the said investments as at the following valuation date (31/3/2007) at Rs.l7 lacs, apparently disproving its claim of the balance-sheets being not communicable or the companies being defunct. We, accordingly, find no infirmity in the impugned order; the AO shall in the restored proceedings decide the matter factually, issuing specific findings in the matter. We decide accordingly, confirming the impugned order on this ground. 6.1 Respectfully following the view taken by the Tribunal as aforesaid, the order of the CIT(A) is confirmed. 7. The Third ground of the Revenue s appeal is against deletion of addition of ₹ 59,82,05,441 on account of depreciation claimed on HTM category investments. 8. We have heard the rival submissions and perused the relevant material on record. We find this issue is decided by the Tribunal in assessee s own case in ITA No.1003/Coch/2008 by following the judgment of the Hon ble jurisdictional High Court in the case of CIT v. Nedungady Bank Ltd. (264 ITR 545 (Ker.). The Tribunal in para 30 of its order dated 31.05.2011, held as under:- 30. The Revenue before us ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as well, being essentially an explanation of the binding decision by the hon ble high court (supra), which the tribunal directed for being followed in letter and spirit. We hold like wise. Further, the said order being in relation to the assessee itself, it is not considered necessary to reproduce the relevant part of the said order. 4.2 The assessee in the instant case also pleads its case with reference to the shares being, in fact, a trading asset, also yielding trading income. We do not consider the same as of much relevance, as the disallowance is only in relation to the dividend income, which is exempt and, thus, of the same character (taxfree), whether the investment in securities is made by considering it to be a trading asset or otherwise, i.e., irrespective of the turnover therein. Even as held by the tribunal in the assessee s own case for the preceding years (supra), it is the investment in the impugned asset that would be relevant. 4.3 We consider the assessee s case to be governed by the decision by the hon ble high court in the case of CIT v. Dhanalakshmi Bank Ltd. (supra) as well as by the tribunal in its own case for the earlier years. We, accordingly, resto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the revenue village with definite surveyed boundaries. The rural area is however taken as the residual portion excluding the urban area and for that no strict definition is followed. 5. In our view, the definition clause does not exclude the literal meaning of rural branch which necessarily excludes urban areas. If the assessee's case accepted by the Tribunal that population in a Ward has to be reckoned for deciding as to whether the location of a Panchayat is in a rural area or not is accepted, then probably even in Municipal areas there may be Wards with less than 10000 population thereby answering the branch located in such Municipal area also as a rural Branch. Going by the ordinary meaning of Rural Branch, we feel only Branches of the Bank located in rural areas are covered. When the Legislature adopts population as the basis for classification of rural Branches, that too, with reference to the last Census Report, we feel the basic unit as available for identification of rural area in the Census Report can be legitimately adopted. So much so, we feel the above meaning of rural area contained in the Census Report wherein revenue village is treated as a unit of rural ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee by upholding the impugned order. 15 The fourth ground relates to disallowance in respect of payment of pension u/s 37 amounting to ₹ 6,79,07,628/-. 16 We find that an identical issue has been decided by the coordinate Bench of this tribunal in ITA No. 479 Coch/2011 for the AYs 2003-04 vide order dated 12.6.2013 wherein it has been held as under: 6. We have carefully gone through the order passed by this bench of Tribunal in the case of Dhanalaxmi Bank Ltd (referred supra). We notice that the assessee in that case has claimed that the amount received from the Pension Fund is credited in the Profit Loss Account and the amount of pension given to its retired employees is debited to the Profit Loss Account. In that scenario, the Tribunal has expressed the opinion that the amount of pension paid by the taxpayer has to be allowed as deduction in view of the contractual obligation to pay the pension. The observations made by the Tribunal in the above said case is extracted below for the sake of convenience: 6. We have considered the rival submissions on either side and also perused the material available on record. The only issue arises for consideration is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the same in the light of observations made by this Tribunal and thereafter decide the same after giving reasonable opportunity to the taxpayer . 7. According to the Ld. Counsel for the assessee, the facts and circumstances prevailing in that instant case are also identical with the case of M/s Dhanalakshmi Bank. We notice that the tax authorities have not examined the present claim of the assessee that there is no duplication in this regard. Hence, in our view, the claim of the assessee needs re-examination at the end of the Assessing Officer in the light of the decision rendered by this Bench in the case of Dhanalaxmi Bank Ltd (referred supra). Accordingly, we set aside the order of the Ld. CIT(A) on this issue and restore the matter to the file of the Assessing Officer with a direction to examine the issue afresh by duly considering the facts prevailing on this issue and also by taking into consideration the decision rendered by the Tribunal in the case of Dhanalaxmi Bank Ltd (referred supra). 16.1 Therefore, respectfully following the decision of the coordinate bench of this tribunal, we restore the matter to the file of the Assessing Officer with a direction to examine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its view, could only be considered as a contingent liability, and the principles as enumerated in the case of Shree Digvijay Cement Mills Ltd. vs. VOf (2002) 259 ITR 705 (sq and CIT vs.T.V S Iyengar Sons Ltd. (1996) 222 ITR 344 (SC), were found applicable in the undisputed facts and circumstances of the case. We, therefore, in line with the decisions by the tribunal, including in the assessee's own case for the earlier year, uphold the addition. We decide accordingly 20.1 Respectfully following decision given by the coordinate Bench of this Tribunal, we dismiss this ground of the assessee for the year under consideration also. 21 Seventh ground relates to computation of income under section 115JB. 23 At the time of hearing, the ld AR did not press this ground and accordingly, the same is dismissed as not pressed 24 The last issue relates to levy of interest u/s 234B and 234C 25 We find that this issue is squarely covered by the decision of the Tribunal in assessee s own case for the AY 2006-07 in ITA No. 18 65/Coch/2009 dt 30.6.2011 wherein the Tribunal has decided the issue against the assessee by holding as under:- A liability u/s 234B(3) provides for a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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