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TMI Blog2019 (6) TMI 993X X X X Extracts X X X X X X X X Extracts X X X X ..... to him to invoke Rule 8D and make a further disallowance u/s 14A. It is observed that the issue involved in the year under consideration as well as all the material facts relevant thereto are similar to A.Ys. 2008-09 and 2009-10, inasmuch as, no proper satisfaction u/s 14A(2) was recorded by the AO in the assessment order passed for the year under consideration about the disallowance suo motu offered by the assessee being incorrect by pointing out any deficiency. We, therefore, respectfully follow the decision of the Coordinate Bench of this Tribunal rendered in assessee s own case in [2016 (6) TMI 181 - ITAT KOLKATA] and uphold the impugned order of the CIT(Appeals) deleting the disallowance made by the AO u/s 14A by applying Rule 8D. Addition on account of income from house property - CIT(Appeals) directed the AO to determine the income of the assessee from house properties by taking the annual value on the basis of Municipal valuation - HELD THAT:- As in case of CIT vs.- Satya Company Limited . 1993 (8) TMI 293 - CALCUTTA HIGH COURT] wherein held when the Municipal valuation of the property in question itself is available and such valuation has not been disputed, the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing ITA No. 980/KOL/2018 are cross appeals, which are directed against the order of ld. Commissioner of Income Tax (Appeals)-3, Kolkata dated 13.03.2018. 2. In Ground No. 1 of its appeal, the Revenue has challenged the action of the ld. CIT(Appeals) in deleting the addition of ₹ 61.26 crores made by the Assessing Officer on account of amortization of premium paid for purchase of securities. 3. The assessee in the present case is a Company, which is engaged in the business of Banking. The return of income for the year under consideration was filed by it on 27.09.2012 declaring total income of ₹ 423,93,73,750/-. In the Profit Loss Account filed along with the said return, a sum of ₹ 61.26 crores was deducted by the assessee from interest earned as amortization of premium paid for purchase of securities. In this regard, it was explained on behalf of the assessee before the Assessing Officer that the amortization of premium amounting to ₹ 61.26 crores for purchase of HTM categories of securities was not considered in the amount of purchase as debited in the Investment Trading Account and the same was charged to the Profit Loss A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied on the decision of the Hon ble Supreme Court in the case of United Commercial Bank vs. CIT (240 ITR 355) to contend that there is no distinction between the securities held as stock-in-trade or investment in the case of Bank and the same is not relevant for deciding the issue under consideration. It is, however, observed that the decision of the Hon ble Supreme Court in the case of United Commercial Bank (supra) cited by the ld. Counsel for the assessee was considered by the Hon ble Delhi High Court while deciding the case of Punjab Sind Bank (supra). In the said case, the assessee had claimed amortization of expenses incurred in respect of premium paid by the assessee for purchase of securities and the same was disallowed on the ground that the securities were held as investment. The stand taken by the revenue was that when the securities held as investment were to be transferred, the profit and loss arising therefrom would be completed after taking into account the cost of acquisition. This stand was accepted by the Tribunal and the question that arose for consideration of the Hon ble Delhi High Court was whether the Tribunal was correct in not allowing the deduction o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the I.T. Act, 1961 which are rightly applicable in case of the Banking Companies . 7. As agreed by the ld. Representatives of both the sides, the common issue involved in Grounds No. 4 5 and partly in Ground No. 2 of the Revenue s appeal relating to the additions made while computing the book profit of the assessee as per section 115JB of the Act is squarely covered in favour of the assessee by the various decisions of the Tribunal including the decision of the Coordinate Bench of this Tribunal in the case of UCO Bank (156 ITD 146), wherein it was held that the provisions of section 115JB of the Act are not applicable to the assessee, which is a Banking Company and the amendment brought in section 115JB read with Explanation 3 thereto by the Finance Act, 2012 making section 115JB applicable even to the Banking companies, is applicable only prospectively from assessment year 2013-14. Respectfully following the said decision of the Coordinate Bench of this Tribunal, we uphold the impugned order of the ld. CIT(Appeals) giving relief to the assessee on this issue. 8. As regards the addition made by the Assessing Officer on account of disallowance unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de by the Assessing Officer under section 14A by applying Rule 8D. Grounds No. 2, 4 5 of the Revenue s appeal are accordingly dismissed. 10. In Ground No. 3, the Revenue has challenged the action of the ld. CIT(Appeals) in deleting the addition made by the Assessing Officer on account of income from house property. In the return of income filed for the year under consideration, a loss was shown by the assessee under the head income from house property . On perusal of the relevant details, the Assessing Officer found that the rental income received by the assessee from the house properties owned by it was very low and in some cases it was even nil. He also noted that the annual value of the properties owned by the assessee was determined in the immediately preceding years on estimation basis by taking into consideration the average rates of rent at which such properties could be let out. He accordingly considered the estimation of deemed rent made for the immediately preceding year, i.e. A.Y. 2011-12 and determined the annual value of the properties of the assessee for the year under consideration by increasing the same by 5%. After allowing deductions to the annua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Particulars Amount (Rs.) Operating expense as per profit loss account (domestic) 2691,38,87,410 Total business of the bank (Advances + deposits) 270738,17,90,301 Balance of long-term lending outstanding 36407,49,27,134 Operating expenses apportioned to income from long-term lending 2691,38,87,410 x 36407,49,27,134 2,70,738,17,90,301 361,92,42,632 The basis adopted by the assessee for apportionment of the total operating expenses was not found acceptable by the Assessing Officer. According to him, the assessee while apportioning the operating expenses had considered the non-performing assets also from which no income was recognized. He held that when no income was recognized from the non performing assets, the operating expenses were not required to be apportioned to such non-existent income and, therefore, the method adopted by the assessee was not cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the ratio of interest on long term lending to total interest income. The Learned Assessing Officer has failed to appreciate the basic fact that operating expenses are incurred not only for managing performing assets but also for managing all assets and deposits accepted by the appellant bank. If the formula applied by the Learned Assessing Officer for apportioning operating expenses is accepted, it gives a distorted result. Such formula implies that the bank incurred operating expenses in relation 10 performing assets only which is not factually correct. No specific formula has been prescribed in section 36(1)(viii). The basis of apportioning operating expenses as adopted by the appellant bank is being followed consistently and such basis has been accepted by the Revenue consistently till assessment year 2010-11. There is no reason to deviate from the rule of consistency . The ld. CIT(Appeals) did not find merit in the submissions made on behalf of the assessee on this issue. According to him, the basis followed by the Assessing Officer for apportionment of operating expenses was more reasonable especially in the case of Bank as the volume of bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m finance eligible for deduction under section 36(1)(viii) was not accepted by the authorities below mainly on the ground that the said basis adopted by the assessee had also taken into consideration the non-performing assets from which no income was recognized. According to them, when no income was recognized from the non-performing assets, there was no justification to apportion operating expenses by taking into consideration the non-performing assets which did not yield any income. As rightly contended on behalf of the assessee in this regard before the ld. CIT(Appeals) as well as before us, the operating expenses were required to be incurred by the assessee in relation to its total banking business and the non-performing assets definitely formed part of such business. The assessee-Bank was required to manage both performing as well as non-performing assets and the operating expenses incurred by it thus were attributable to non performing assets also. It appears that this vital aspect was not appreciated by the authorities below in proper perspective and as rightly contended by the ld. Counsel for the assessee, the basis adopted by them for apportioning the operating expenses wi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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