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TMI Blog2016 (9) TMI 1465X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, we find that this ground of appeal raised by the assessee has no merit and the same is dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... provision will not leads to allowable expenditure, unless payment is made. Thus, this ground of appeal raised by the assessee is dismissed. 5. The third ground of appeal relating to provision for standard assets. The assessee has claimed an amount of ₹ 30,87,213/- as a provision for standard assets by debiting the same in the profit & loss account. However, this amount is shown in the balance sheet under the head "provision on performing assets". In the assessment order, the A.O. has observed that no actual expenditure was incurred by the assessee and only a provision which is in the nature of contingent liability was made on standard assets only with a presumption that the same may become non-performing asset at a future date. Thus, A.O. disallowed by observing that the nature of contingent liability do not constitute an expenditure. Assessee carried matter in appeal before the CIT(A). The Ld. CIT(A) confirmed the order of the A.O. by observing that the assessee is provided only provision for standard assets, but it is not the case of the assessee that any of these assets have become bad or non-recoverable. It is also not the case that any of these loans/assets are written ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excess of liabilities over assets of Bobbili bank should be beyond the payment made for expansion of its business. Since the expenditure was incurred by the assessee in the regular course of business towards promotion and expansion of its business, the same should be allowed as a business expenditure. It was also argued alternatively before the Ld. CIT(A) that the price paid (cost of excess of liabilities over the assets) is similar that of the goodwill. The same should be treated as a goodwill which is an intangible asset as per the Act. Depreciation as applicable to intangible asset should be given to assessee in the case of amortization of loss is not allowed. The Ld. CIT(A) has considered the detailed submissions made by the assessee and he has observed that the allowance of brought forward losses or unabsorbed depreciation are covered by provisions of IT Act not by RBI guidelines. As per sub-section 7 of section 72AB of the Act the accumulated losses would have been entitled to carry forward and set off under the provisions of section 72 of the Act. Similar in the case of the unabsorbed depreciation and law should be allowable in the hands of the Bobbili branch as per the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of deduction under sections 32, 35D, 35DD or 35DDA of the Act. Similarly, section 72AB deals with the carry forward and set off of accumulated losses and depreciation in the case of business re-organization of the cooperative banks. He has observed that as per sub-section 7 of section 72AB of the Act, the accumulated losses would have been entitled to carry forward and set off under the provisions of section 72 of the Act, similar is the case with unabsorbed depreciation. Therefore, the main condition which needs to be fulfilled is that the said loss should have been allowable in the hand of Bobbili branch as per the provisions of the Act. The Bobbili bank never filed its return of income, thus, its loss is not otherwise eligible to be carry forward under the provisions of section 72 of the Act and he confirmed the order passed by the A.O. We find that the Bobbili Cooperative bank has not filed any return of income. The assessee also not brought anything on record to show that the Bobbili bank has filed the return of income. Once the Bobbili bank which is merged with assessee's bank not filed any return of income, as per the provisions of section 72AB of the Act, the Bobbili bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case. We find no reason to interfere with the order passed by the Ld. CIT(A). This ground of appeal raised by the assessee is dismissed. 11. So far as ground no.6 is concerned, it is relating to amortization of premium on Government securities. In the assessment order, the A.O. has observed that the assessee has not incurred any expenditure. It is only a provision i.e. contingent liability was made which may become payable at future date, therefore, the provisions are not allowable u/s 36 & 37 of the Act, the same is disallowed. On appeal, the Ld. CIT(A) confirmed the order of the A.O. On appeal, the Ld. Counsel for the assessee has submitted that this is an ascertained liability under the provision and the amount is already paid. We find this needs verification, therefore, we set aside the order passed by the CIT(A) and remit the matter back to the A.O. to examine afresh and decide in accordance with law. This ground of appeal raised by the assessee is allowed for statistical purposes. 12. In the result, the appeal filed by the assessee is partly allowed for statistical purposes. 13. The Cross objection filed by the assessee vide CO No.5/Vizag/2013 is only supportive and the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are capital is a charge against the profits. AD, after considering the explanation offered by the assessee, held that the interest on share capital is nothing but appropriation of profits and is not an expenditure incurred for carrying on the business and disallowed the claim. During the appellate proceedings it is pointed out on behalf of the assessee that similar disallowance was made in the assessee's own case for assessment year 2007-08. On appeal, CIT(A) upheld the view of the AO that the said payment is only an appropriation of profits and not a charge of profit. Matter went to Hon'ble Tribunal which, vide its order dtd.29.08.2011 in ITA No.5&19/V/2011, held that the interest on share capital goes to reduce the gross interest collected by it from its members and would not form part of profits at all. The relevant portion of the Hon'ble Tribunal's decision is reproduced hereunder: "As stated earlier, it was held in those cases that the income tax is to be levied on the real income i.e. the profit arrived at on commercial principles subject to the provisions of the Income-tax Act. Accordingly it was held that the rebate given to the members is not a part of pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business i.e. net profit. This is nothing but appropriation of profits but not an expenditure incurred for carrying on the business. The Ld. CIT(A) by following the decision of the coordinate bench of the Tribunal in assessee's own case for the assessment year 2007-08 in ITA No.5/Vizag/2011 & 19/Vizag/2011 for A.Y. 2007-08 vide order dated 29.8.2011 has directed the A.O. to delete the addition made by him. It is submitted across the bar that the very same issue in the assessee's own case is pending before the Hon'ble High Court. In view of the above, by following the coordinate bench of the Tribunal, in view of the doctrine of precedent, we dismiss this ground of appeal raised by the Department. 23. In the result, the appeal filed by the revenue is dismissed. ITA No.445/Vizag/2013 (Assessee's appeal for A.Y. 2009-10): ITA No.450/Vizag/2012 (Revenue's appeal for A.Y. 2009-10): & CO 6/Vizag/2013 (Assesee's appeal for A.Y. 2009-10): 24. The first ground of appeal raised by the assessee is general in nature and the same is dismissed. 25. The second ground of appeal raised in this appeal is relating to the provision for standard assets which is similar to that of assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 32. So far as revenue appeal in ITA No.450Vizag/2012 is concerned, the ground of appeal raised by the revenue is similar to the ground raised for the assessment year 2008-09 in ITA No.449/Vizag/2012. In view of our decision above, this ground of appeal raised by the revenue is dismissed. 33. The cross objection filed by the assessee is supportive and the same is dismissed. ITA No.726/Vizag/2013 (Assessee's appeal for A.Y. 2010-11): ITA No.2/Vizag/2014 (Revenue's appeal for A.Y. 2010-11): & ITA No.38/Vizag/2014 (Revenue's appeal for A.Y. 2010-11): 34. The first ground of appeal raised by the assessee is general in nature and no adjudication is required. Therefore, same is dismissed. 35. So far as second ground of appeal raised by the assessee is concerned is regarding disallowance of ₹ 5,64,79,087/- u/s 40(a)(ia) of the Act. In the assessment order, the A.O. has observed that assessee being a cooperative society engaged in the banking business is under obligation to deduct the TDS on the interest payment exceeding ₹ 10,000/-, in view of the specific provision contained in section 194A(3)(i)(b) of the Act and as assessee failed to deduct the TDS, the A.O. has dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year i.e. 2010-11 vide ITA No.38/Vizag/2014 is concerned, the facts are in brief that the assessee has paid interest to various depositors and no TDS was deducted. The A.O. of the opinion that assessee being a cooperative society engaged in the banking business is under obligation to deduct the TDS on interest payment exceeding ₹ 10,000/- in view of the specific provision u/s 194A(3)(i)(b) of the Act and the assessee has failed to deduct TDS. Therefore, the A.O. has disallowed the claim of the assessee. The Ld. CIT(A) initially confirmed the order of the A.O. Subsequently, the assessee has filed a rectification u/s 154 of the Act dated 14.12.2013 and submitted that the very same issue has been considered by the CIT(A) as well as ITAT for earlier years and decided in favour of the assessee. The Ld. CIT(A) has considered the submissions of the assessee and directed the A.O. to delete the addition by observing as under: 5.2 I have considered the submissions. The issue considered in the above appellate order was whether the assessee, a cooperative bank is required to effect TDS on payment of interest made to its members, when the amounts exceed ₹ 10,000/-. A v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iable u/s.154 of the I.T. Act. Further, it is noted that the assessee had relied on the CBDT circular No.9/2002 dtd.11.09.2002 and the decision of Bombay High Court in the case of Jalgaon District Central Co-operative Bank, in its appeal for A.Y.2007-08, which has been discussed and considered by the learned CIT(A) while deciding the assessee's appeal for A.Y.2007-08. The relevant extract of the CIT(A) order has been referred and discussed in the Hon'ble ITAT's order for A.Y.2007-08, (copy of which submitted as part of paper-book in the original appeal). Therefore, it cannot be said that this aspect was not considered by the Hon'ble ITAT while passing order in the assessee's appeal for A.Y.2007-08. 5.4 In view of the above discussion, I am convinced that the appellate order dtd.22.10.2013 suffers from mistake apparent from record and the mistake is rectified by substituting the following operative para in the place of the para 6.3, 6.4 & 6.5 of the appellate order dtd.22.10.2013. 6.3 I have considered the submissions made. In view of the clarification given in the CBDT circular No.9/2002, it is held that the assessee is not required to effect TDS on the inte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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