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TMI Blog2018 (9) TMI 533X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 147 is squarely applicable on the given facts for A. Y. 2008-09 and the reopening is beyond four years from the end of relevant assessment year and thus cannot be held to be valid. We therefore find force in the contentions of the Ld. Counsel for the issue of reopening raised for A. Y. 2008-09 and accordingly quash the reassessment proceedings u/s 147 for Assessment Year 2008- 09 and allow the relevant ground for assessment year 2008-09 in favour of the assessee. Assessee claimed deduction u/s 136(1)(viia) only in the computation of income and no such provision was actually made in the profit and loss account. It is true that the details of the deduction claim u/s 136(1)(viia) was available on record but the legal angle of examining this claim was not discussed at length during the course of assessment u/s 143(3). The claim of the assessee were based on certain judicial pronouncements which the Assessing Officer later on found to be favouring the revenue. This change of legality of the issue triggered the issuance of notice u/s 148 of the Act. It is not disputed that the notice issued u/s 148 of the Act for Assessment Year 2009-10 and 2010-11 are within the period of four ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2016 arising out of the order u/s 143(3) r. w. s. 147 of the Act for Assessment Years 2008-09 to 2011-12. 2. As the issues raised in these appeals are mostly common, these were heard together and are being disposed off by this common order for the sake of convenience and brevity. 3. From perusal of the ground of appeals raised by the assessee in these 9 appeals, we find that the common issues can be categorized into two parts. 4. Firstly which are arising out of the assessment orders framed u/s 143(3) of the Act pertaining to Assessment Year 2008-09 to 2013-14 by ITA No. 107, 109, 111, 113 114/Ind/2017; (i) Disallowance of amortization of expenses on government securities for Assessment Years 2008-09 to 2012-13; (ii) Disallowance of claim u/s 36(1)(viia) of the Act for Assessment Year 2013-14. 5. Secondly the issue arising out of the orders framed u/s 143(3) r. w. s. 147 of the Act; (i) Challenging the validity of notice u/s 148 of the Act as well as the reassessment proceedings made u/s 147 of the Act. (ii) Disallowance of provision for bad and doubtful debts u/s 36(1)(viia) of the Act. (iii) Disallowance of excess provision for non performing of asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 55, 80, 080/- - 2010-11 111 56, 91, 000/- - 2012-13 113 58, 04, 000/- 19, 83, 19, 858/- 2013-14 114 - 14, 06, 63, 980/- (B) Addition made during reopening of Assessment u/s 143(3) r. w. s. 147 of the Act. Assessment Year ITA No 36(1)(viia) Excess provision taxed Amortization 2008-09 106 13, 09, 86, 295/- - 2009-10 108 16, 90, 61, 833/- 6, 13, 39, 600/- 2010-11 110 16, 66, 59, 199/- - 2011-12 112 16, 33, 02, 639/- 58, 04, 000/- 8. We will first take up the issue of re-opening of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme Court in the case of Southern Technologies reported in 320 ITR 577 (Para 41 P. 610 of the report) has affirmed such a claim. The Ld. AO raised a specific query in respect of this deduction. The assessee gave a detailed reply with the working of the advances. After considering the same the Ld. AO allowed the claim of the assessee while passing the original order u/s 143(3). The assessments for the A. Y. 2008-09 was reopened on 24. 03. 2015 beyond four years and subsequent assessments for the A. Yrs. 2009- 10 to 2011-12 were reopened within the expiry of four years. These assessments have been reopened on the ground that the claim of deduction u/s 36(1) (viia) is not allowable since the assessee has not made the provisions. While filing the return the assessee claimed the deduction in computation of income on the basis of the maximum availability prescribed u/s 36(1)(viia). The actual provision made in the books has been added in the income. 3. It was submitted before the lower authorities that the reopening of the assessment is bad in law because it is a mere change of opinion and all the necessary material was filed before the Ld. AO. The assessments were framed all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o issue a notice u/s 148. CIT Versus Fujistu Optel Ltd (359 ITR 67) Madhya Pradesh High Court CIT v/s. Trimurti Builders (M. P. ) (246 CTR 308) CIT Vs. Kelvinator of India Ltd. (2010) 320 ITR 561 (SC) CIT v/s Orient Craft Ltd (354 ITR 536) (Del) court Ranbaxy Laboratories Ltd Versus Deputy Commissioner of Income Tax and OTR 351 ITR 23 Delhi High Court . Rubamin Ltd. Vis. Love Kumar (253 ITR 432) (Guj. ) Ashwamegh Co-operative Housing Society vis. DCIT (353 ITR 413) (Guj. ) Metal Alloys Corporation v/s. ACIT (350 ITR 245) (Guj. ) Mrs. Parveen P. Bharucha vis. CIT (348 ITR page 325) (Mumbai) NDT Systems vis. ITO (255 CTR page 113) (Born. ) Vishwanath Engineers vis. ACIT (354 ITR page 211) (Guj. ) Maruti Suzuki vis. DCIT (356 ITR page 209) DCIT V Anjala Exhibitors I. T. A. T. Delhi Bench ITA No. 4797, 4798, 4799/Del/2012 Dist. Co. Op Bank Ltd V DCIT High Court of Allahabad (2015) 62 taxmann. com 248 (Allahabad) 10. The Ld. Counsel for the assessee further submitted that for the AY 2008-09, the Ld. A. O had raised specific queries in respect of the amortization of securities and the details about t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details in connection with the deduction claimed by the assessee u/s 36(1)(viia) of the Act were very much available with the Assessing Officer during the assessment u/s 143(3) of the Act and the assessments were concluded after examining the relevant details filed by the assessee. No new facts came up before the assessing authority and therefore the reopening was merely based on account of change of opinion. Relying on various judgments, it is contended that reopening of assessments for mere change of opinion are not valid. 13. As regards assessment for A. Y. 2008-09 is concerned we observe that notice u/s 148 of the Act was issued on 24. 3. 2015 and this date falls after the completion of four years from the end of the assessment year 2008-09. For assessment year 2008-09 the assessee duly filed return of income and assessment completed u/s 143(3) of the Act and has submitted all material facts necessary for the assessment. All these facts shows that the first proviso to section 147 of the Act is squarely applicable on the given facts for A. Y. 2008-09 and the reopening is beyond four years from the end of relevant assessment year and thus cannot be held to be valid. We theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dinate Bench in the case of M/s. Narmada Malwa Grameen Bank Vs ACIT 2(1), Indore M. A No. 104/Ind/2012 arising out of I. T. A No. 162/Ind/2011 dated 16. 04. 2013. 18. Per contra the Ld. Departmental Representative supported the order of the Tribunal in the case of M/s. Narmada Malwa Grameen Bank Vs ACIT 2(1), Indore (supra). 18. We have heard rival contentions and perused the records placed before us. We find that the Ld. A. O while framing the assessment u/s 143(3) of the Act for A. Y. 2012-13 and 2013-14 as well as during the reassessment proceedings for A. Y. 2009-10 to 2011-12 commonly observed that the deduction u/s 36(1)(viia) of the Act is allowable only to the extent of the provision made in the books of accounts. For coming to this conclusion the Ld. A. O referred and relied on the judgment of Hon ble High Court of Punjab Haryana in the case of State Bank of Patiala V/s CIT (2005) 272 ITR 54, decision of Coordinate Bangalore Bench in the case of Syndicate Bank ITA No. 708 709/Bang/2010, another decision of ITAT Bangalore Bench in the case of Canara Bank ITA No. 58/Bang/2004 as well as decision of ITAT, Chennai Bench in the case of Vellore Estate Co-operative Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and relied by the Assessing Officer, find no reason to interfere in the findings of Ld. CIT(A) confirming the disallowance of claim u/s 36(1)(viia) of the Act made by the Ld. A. O in assessment framed u/s 143(3) of the Act for Assessment Year 2012-13 and 2013-14 and those made in order made u/s 143(3) r. w. s. 147 of the Act for Assessment Years i. e 2009-10 to 2011-12. This common issue is decided against the assessee and the relevant ground relating to this issue of the assessee are dismissed. 21. Next common issue relates to disallowance of amortization of expenses for government securities. 22. Brief fact relating to this issue are that the assessee debited certain amount towards amortization of premium paid on government securities contending that the amortization have been made as per the guidelines issued by Reserve Bank of India dated 16. 10. 2000, as per which the investment portfolio of the banks is required to be classified under three categories i. e Head to Maturity (HTM), Held for Trading (HFT) and Available for Sale (AFS). Ld. A. O however did not support the claim of expense made by the assessee observing that the government securities were acquired with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the Vijaya bank Ltd. and a clarification was made that the securities must be regarded as stock in trade by the bank. Therefore the claim of loss if debited in the books of accounts would be given the same treatment as is normally given to the stock in trade. (pg. 68-69 of Pb). Subsequently circular no. 665 dated 0511 011993 it was again clarified that the banks are generally governed by the instructions of the Reserve Bank of India from time to time with regard to classification of assets and also accounting standards for investment. The board has therefore decided that the Ld. AO should determine on the facts and circumstances of each case as to whether any particular security constitutes stock in trade or investment taking into account the guidelines issued by the Reserve Bank of India. Subsequently the board has issued the further instruction No. 17/2008 dated 26. 11. 2008 wherein it has instructed As per RBI guidelines dated 16th 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). Investments classified under HTM category need not be mar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irection cannot override the provisions of the IT Act. The Ld CIT(A) has wrongly relied on the provisions of sec. 36(1 )(viia). He dismissed the assessee's appeal. 6. It is humbly submitted that the securities have been held for SLR as a stock in trade and the amortization provided in the Profit Loss A/c is an allowable expenditure. For the Co-operative banks, as per RBI guidelines, investments classified under 'Held to Maturity' (HTM) category need not be marked to market and will be carried 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. The deduction on account of amortization of premium on purchase of Govt. securities is allowable in accordance with the CBDT's Instruction No. 17 vide para 2(vii) dated 26-11-2008. Relevant extracts are already filed in above paragraphs. In this connection, we would like to draw your honour's kind attention to the various judgments wherein it has been held that the provision for amortization is an allowable expenditure by various Tribunals and by the Hon'ble High Court in the case of CIT v/s HDFC Bank reported in 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o various judgments placed in the paper book No. 2 dated 26. 4. 2018. Similar facts came up for adjudication before Hon ble Gujarat High Court in the case of CIT V/s Rajkot Dist. Co-Op Bank Ltd Tax Appeal No. 56/2013 dated 10/02/2014 and following question was raised for consideration before the Hon ble court; ( i) Whether in the facts and circumstances of the case and in law, the Appellate Tribunal is justified in holding that the A. O and CIT(A) have erred in disallowing the amortization of security premium of ₹ 40, 30, 000/- ? ( ii) Whether in the facts and circumstances of the case and in law, the Appellate Tribunal is justified in not considering that the securities held under Held to maturity (HTM) category as per RBI guidelines are not meant to earn profit but are required to be kept as they are till maturity? 28. Further the facts in this case are mentioned below: 2. 1 The respondent-assessee is a cooperative bank. As per the Reserve Bank of India guidelines, it is required to deposit certain amounts in Government securities and to hold the same till maturity in order to maintain Statutory Liquidity Ratio (SLR). In certain cases, the acquisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, arises. 8. Resultantly, the Tax Appeal is dismissed. Notice is discharged with no order as to costs. 30. We have examined the facts of the instant appeal and find that they are similar to the facts adjudicated by the Hon ble High Court of Gujarat in the case of CIT V/s Rajkot Dist. Co-Op Bank Ltd (supra). Therefore Respectfully following the judgment of Hon ble High Court of Gujarat, we are of the considered opinion that both the lower authorities erred in confirming the addition and the assessee has rightly claimed the amortization of loss in the value of government securities and the same is liable to be treated as business expenditure. In the result this common issue is decided in favour of the assessee and the relevant grounds raised in Assessment Year 2008-09 to Assessment Year 2012-13 in Incometax Act, 1961, No. 107, 109, 111, 112, 133/Ind/2017 stands allowed. 31. Now the last issue which remains to adjudicate is for Assessment Year 2009-10 wherein the Ld. Assessing Officer while framing the assessment u/s 143(3) r. w. s. 147 of the Act noticed that the assessee bank has maintained the provision for Non Performing Assets (NPA) at ₹ 948. 62 lakhs as again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. Under this circumstances the addition are bad in law and deserves to be deleted . 35. Per contra Ld. Departmental representative supported the findings of both the lower authorities. 36. We have heard rival contentions and perused the records placed before us. Assessee is aggrieved with the findings of Ld. CIT(A) confirming the addition of ₹ 613. 39 lakhs made by the Assessing Officer on account of disallowance of alleged excess provision for Non performing assets. Issue originated from the audit observation made by the statutory auditors in the note to accounts stating that the provision for Non Performing Assets amounting to ₹ 948. 62 lakhs was maintained as against the required provision under Non Performing Asset schemes at ₹ 335. 32 lakhs. Ld. A. O taking the basis of the observation of the statutory auditors in the audited balance sheet reversed provisions made in the earlier years limiting them to the provision required as per the Reserve Bank of India norms thereby making addition of ₹ 613. 39 lakhs. Ld. CIT(A) dealing with this issue confirmed the view of the Assessing Officer observing that the liabilities stated in the note on account is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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