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TMI Blog2016 (12) TMI 1760X X X X Extracts X X X X X X X X Extracts X X X X ..... algamating 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 acq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 - C.O.No.17 & 20/VIZ/2016, ITA Nos. 362 & 371, 379 & 391/VIZ/2015 (Asst. Year : 2011-12 & 2012-13) - - - Dated:- 30-12-2016 - Shri V. Durga Rao And Shri G. Manjunatha, JJ. Assessee by : Shri G.V.N. Hari Advocate. Department By : Shri Govindh Rajan - DR ORDER V. Durga Rao, ITA Nos.362 371/VIZ/2015 filed by the assessee and ITA Nos. 379 391/VIZ/2015 field by the Revenue are cross appeals against the order of the Commissioner of Income Tax (Appeals)-1, Visakhapatnam, dated 27/08/2015 29/09/2015 for the Assessment Year 2011-12 2012-13 respectively. The Cross Objection No. 17 20/VIZ/2016 filed by the assessee in ITA No.379 391/VIZ/2016. ITA No.362/VIZ/2015 2. The assessee has raised the following grounds of appeal:- 1. The orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r has wrongly held that the liability is a contingent liability and submitted that it is an ascertained liability, therefore, the same has to be allowed. He further submitted that the very same came up before this Tribunal in assessee s own case for the Assessment Year 2008-09 in ITA No.449/Vizag/2012 by order dated 30/09/2016, the Hon'ble Tribunal remanded the issue back to the file of the Assessing Officer for fresh adjudication in accordance with law. 6. On the other hand, Departmental Representative supported the orders of the authorities below. 7. We have heard both the parties, perused the material available on record and gone through the orders of the authorities below. 8. 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) andremit the matter back to the file of the Assessing Officer 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 statis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved 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 is not eligible to carry forward any losses or unabsorbed depreciation. The same cannot be allowed in the hands of the assessee‟s case. The Ld. CIT(A) correctly by considering the provisions of the Act disallowed the claim made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra), we find no infirmity to interfere with the findings of the Commissioner of Income Tax (Appeals), which is hereby confirmed and this ground of appeal raised by the assessee is dismissed. 15. Ground No.5 relating to levy of interest under section 234A 234B of the Act is consequently in nature, hence, the same is dismissed. ITA No. 379/VIZ/2015 16. Grounds No. 1 to 4 relating to interest paid to the members of the bank. 17. When this appeal is taken up for hearing, learned counsel for the assessee submitted that the issue involved in this appeal is covered by the decision of the Coordinate Bench of this Tribunal in assessee s own case for the Assessment Year 2007-08, the same is considered by the Tribunal in the Assessment Year 2008-09 in ITA No. 444/Vizag/2012 by order dated 30/09/2016 decided in favour of the assessee. 18. On the other hand, Departmental Representative fairly accepted that this issue is decided in favour of the assessee, however, the same is pending consideration before the Hon'ble High Court. 19. We have heard both the parties, perused the material available on record and gone through the orders of the authorities below. 20. The is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee to explain the reasons for non-deduction of TDS. The assessee explained before the Assessing Officer that the same disallowance was made for the Assessment Year 2007-08 and the Hon'ble ITAT vide its order dated 29/08/2011 in ITA No. 5 19/Vizag/2011, allowed the claim of the assessee. However, the Assessing Officer has not accepted the explanation given by the assessee and observed that the assessee being a cooperative bank ought to have been deducted TDS. Since assessee failed to deduct TDS, disallowance made under section 40(a)(ia) of the Act. 22. On appeal, Commissioner of Income Tax (Appeals) by following the decision of the Coordinate Bench of this Tribunal for the Assessment Year 2007-08 in ITA No. 5 19/Vizag/2011 dated 29/08/2011 and directed the Assessing Officer to delete the disallowance made under section 40(a)(ia) of the Act. 23. On being aggrieved, Revenue carried the matter in appeal before the Tribunal. 24. Learned Departmental Representative relied on the order of the Assessing Officer, whereas learned counsel for the assessee relied on the order in assessee s own case for the Assessment Year 2007-08. 25. We have heard both the parties, p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preciation on the same. 4. The learned Commissioner of Income Tax (Appeals) is not justified disallowance the addition of ₹ 2,49,40,630/- made by the Assessing Officer towards disallowance of provision for reduction in value of Government securities held under the category Available for Sale‟. 5. The learned Commissioner of Income Tax (Appeals) is not justified in confirming the levy of interest under section 231B of the Act. 6. Any other ground that may be urged at the time of appeal hearing. 30. The first ground of appeal is general in nature, hence, no adjudication is required. Ground Nos. 2 3 of the appeal relate to disallowance of amortized loss on account of merger of Ramachandrapuram Bobbili Banks. 31. In the assessment order, the Assessing Officer has noted that the assessee had claimed amortization loss on account of merger of Ramachandra Puram bank, Bobbili Bank, Ongole Bank and Balaji Bank, aggregating to ₹ 2,48,82,516/- in its profit loss account. It was explained before the Assessing Officer that on account of merger, accumulated loss was taken over. This loss was stated to be amortized over a period of five years as per RBI gui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions in the case of business re-organisation of Cooperative banks. Section 44DB of the Act deals with the details of such computation in the case 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 Bobb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied by the Ld. Counsel for the assessee also decided in a different facts and circumstances and therefore, we find no application to the facts of the present 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. 37. In view of the decision of the Coordinate Bench of this Tribunal in assessee s own case (supra), we find no infirmity to interfere with the findings of the Commissioner of Income Tax (Appeals), which is hereby confirmed and this ground of appeal raised by the assessee is dismissed. 38. Ground No.4 relating to disallowance of provision for deduction in Government securities. 39. During the course of assessment proceedings, the Assessing Officer has noted that the amount of ₹ 2,49,40,630/- was claimed as deduction towards provision for deduction in Government securities to the profit loss account. The Assessing Officer has called upon the assessee to explain as to why the same should not be disallowed as the same is only a contingent liability. It was submitted to the Assessing Officer that the amount of deduction in Government securities was arrived on the basis of value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed 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. 43. So far as ground No.5 is concerned, which is consequential in nature, hence, we dismiss this ground. ITA No. 391/VIZ/2015 44. Grounds No. 1 to 4 relating to interest on share capital paid to members. 45. Facts of the case, in brief, are that the assessee is a bank, field its return of income by declaring total income of ₹ 6,36,03,404/-. The return of the assessee was processed under section 143(1) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowable expenditure. The A.O. has not accepted the explanation of the assessee and he has observed that the assessee has to allocate the interest on share capital only upon determination of the surplus arising from 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. Respectfully following the decision of the Coordinate Bench of this Tribunal in assessee s own case (supra), this ground of appeal raised by the Revenue is dismissed. 52. Grounds No. 5 to 8 relating to non deduction of TDS under section 40(a)(ia) of the Act. 53. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of section 2(19) or section 194A(3) of the I.T. Act do not make any distinction between the co-operative societies carrying on banking business or other cooperative societies. Respectfully following the decision of Hon'ble ITAT in the assessee‟s case for A.Y. 2007-08, the Assessing Officer is directed to delete the impugned disallowance of ₹ 22,65,81,457/-. 59. We find that there is no infirmity in the roder of the Commissioner of Income Tax (Appeals) hence, this ground of appeal raised by the Revenue is dismissed. 60. Grounds No. 9 to 12 are relating to amortization of premium paid for acquisition of HTM securities. 61. In the assessment order, the Assessing Officer has noted that the assessee claimed an amount of ₹ 20,98,223/- being amortization of premium on Government securities in profit loss account. The assessee bank was asked the explain the basis on which the claim was made. It was submitted before the Assessing Officer that the assessee bank was required to maintain specified percentage of investments in approved Government securities which was valued as per RBI norms at the end of the financial year. The reduction in valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while dismissing the revenue's appeal, held that the Instruction of the CBDT issued under section 119(2) of the Income Tax Act would bind the Revenue. In view of the Instruction of the CBDT and the decision of the Hon'ble High Court of Gujarat, I direct the Assessing Officer to allow this claim. However, the Assessing Officer, while allowing the above claim of the assessee is directed to ensure the correctness of the working of the amount amortized and claimed. 63. On being aggrieved, the Revenue is in appeal before the Tribunal. 64 Learned Departmental Representative strongly supported the order of the Assessing Officer and also submitted that in earlier year i.e. Assessment Year 2008-09, very similar issue has been remitted back to the file of the Assessing Officer for fresh consideration. Hence, this issue may also be remitted back to the Assessing Officer. 65. On the other hand, learned counsel for the assessee fairly accepted that in the Assessment Year 2008-09, similar issue has been remitted back to the Assessing Officer for fresh consideration. 66. We have heard both the parties, perused the material available on record and gone through the orders of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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