9911796707
TMI Blog2012 (12) TMI 1045X X X X Extracts X X X X X X X X Extracts X X X X ..... ds relate to the following issues, namely: (1) (Ground Nos.1,3 & 4) that the CIT (A) had erred in treating the investment made by the assessee Bank in securities as stockin- trade; & (2) (Ground No.2) that the CIT (A) also erred in allowing the premium paid for purchase of a capital asset to be amortized and allowed as revenue expenditure. 4. As the issues raised by both the parties pertaining to the same assessee as well as the same assessment year, for the sake of clarity and convenience, they were heard, considered together and disposed off in this consolidated order. 5. Let us now proceed to deal with the issues raised by the assessee-Bank as under: I. ITA No.117/B/12 - AY 2008-09 - By the assessee-Bank: 6. The issue, in brief, is as under: The assessee-Bank ['the assessee' henceforth], a Grameena Bank engaged in the banking activity, furnished its return of income for the assessment year under consideration, admitting an income of Rs. 24,48,06,180/- on 25.7.2008 which was initially processed u/s 143(1) of the Act. Subsequently, the case was taken up for scrutiny. During the course of assessment proceedings, the AO noticed, among others, that the assessee had claimed prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d apply for encashment. In view of this, the addition made by the AO on account of the privilege leave encashment of Rs. 52,35,008/- is sustained........." 8. Agitated, the assessee has come up with the present appeal. During the course of hearing, the submissions made by the learned AR are summed up as under: - that the authorities below have failed to appreciate that the provision for leave encashment is ascertained liability and has been provided on the basis of an actuarial valuation and is essential component in the determination of the income; - that the authorities below have failed to appreciate that the entry in the books of accounts in this regard is in accordance with the accepted standards and guidelines issue by the Institute of Chartered Accountants of India and the question of disallowance of the same on account of being a contingent liability does not arise as it is ascertained liability; - that without prejudice, the authorities below ought to have allowed the amount actually paid during the year and debited to provisions account as otherwise, by not allowing the provision and also payment made during the year amounts to denial on both accrual and payment basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for deduction of the provision for privilege leave encashment is not a contingent liability and is to be allowed....." 9.1. As the issue under consideration is similar to that of the one which has been discussed above and also in conformity with the ratio laid down by the Hon'ble Apex Court in the case of BEML (supra), we are of the considered view that the assessee's claim for deduction of the provision for privilege leave encashment was not a contingent liability as projected by the authorities below. It is ordered accordingly. We shall now proceed to address the grievances of the Revenue hereunder, chronologically. II. ITA No.232/B/12 - AY 2008-09 - By the Revenue: 10. Briefly stated, the assessee had claimed depreciation of Rs. 8,06,801/- on securities which has been rejected by the AO on the ground that the income recognition as per the banking regulations would different from the income determination as per income-tax. The decrease in the value of the securities as on 31st March is only a notional loss and if the assessee has sold the securities and incurred loss then such loss can be allowed. Further, if in the subsequent year, the value of the securities is more than t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nting system regularly maintained by the assessee. The method by which the assessee bank is valuing securities by treating them as stock-in-trade is in accordance with the accounting principles and the revenue itself is treating the profit on maturity of such securities as business income. Therefore, such securities cannot be treated as capital assets. Following the above decision of the Hon'ble Supreme Court and in line with its decision dated 24.1.2008 in ITA No.253/Bang/2007 in the case of ACIT (LTU) v. Vijaya Bank, the Hon'ble ITAT has held that the assessee bank is entitled to value all investments at LCMV by treating such investments as stock-in-trade, and has deleted the disallowance made on loss on valuation. 13.0. After careful consideration of both AO's and appellant's versions and various court decisions cited above, I am of the opinion that the depreciation claimed on investments is an allowable deduction and, accordingly, addition made by AO to the tune of Rs. 8,06,801.00 under this head is now deleted." 12. Aggrieved, the Revenue is in appeal before us. During the course of hearing, the submissions made by the learned D R are summarized as under: - that the CIT (A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of CIT v. ING Vysya Bank Ltd., a similar issue to that of the present one was placed before the Hon'ble jurisdictional High Court for consideration. After taking into account the contentions of either party, the Hon'ble Court in its ruling in ITA No.2886/2005 dated 6.6.2012 had held thus: "31............................It is, therefore, held that all holdings of a banking institution in the form of investment in securities does not automatically acquire the characteristic of stock-in-trade. As to whether a particular investment in any security is in the nature of stock-in-trade or otherwise is a question which has to be examined in each case having regard to the nature of transactions, manner of holding and if it is curtailed or regulated by any other external or outside compulsions other than the volition of the assessee. In the instant case, we are of the view that on the findings recorded by the assessing officer and as confirmed by the appellate commissioner, the tribunal could not and should not have upset such z finding by drawing a comparison to a situation prevailing in respect of some other bank and the view of the tribunal in that case was based on the board cir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. M/s. Bangalore Club in ITA No.562/Bang/06 dated 29.6.2010 of the ITAT, Bangalore; & (iv) M/s. Bangalore Club v. ITO in ITA No.919/Bang/2011 dated: 17.7.2012 (AY 2007-08) of the ITAT, Bangalore. 14. The other grievance of the Revenue relates to the stand of the CIT (A) in allowing the premium to be amortized and allowed as revenue expenditure. 14.1. In this connection, we would like to recall the findings of the earlier Bench in the assessee's own case for the AY 2007-08 on a similar issue. After taking into account the rival submissions and also extensively quoting the findings of the co-ordinate Bench of the Tribunal in the case of Sri M Vishveswaraya Co-op Bank Limited v. JCIT in ITA No.1122/Bang/2010 dated 11.5.2012 with regard to the issue of amortization of premium on investments, the earlier Bench had held that the assessee is entitled to deduction on account of amortization of premium on Government securities. 14.2. In conformity with the findings of the earlier Bench in the assessee's own case for the immediately preceding assessment year, we find that no interference is called for in the findings of the CIT (A). It is ordered accordingly. 15. In the result: (i) t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
