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TMI Blog2019 (10) TMI 1068X X X X Extracts X X X X X X X X Extracts X X X X ..... Learned CIT(A) in deleting the addition made by the Learned AO u/s 14A r.w.r. 8D. Hence, this ground of appeal preferred by the Revenue is dismissed. Addition amortization of premium on Govt. Securities - revenue or capital expenditure - HELD THAT:- It appears that the Hon ble Court has taken care of that the order passed by the Hon ble Jurisdictional High Court in the case of CIT, Rajkot-2 vs. Rajkot Dist. Co-op. Bank Ltd. [ 2014 (3) TMI 110 - GUJARAT HIGH COURT] where it was held that the CBDT instruction providing for amortization of premium paid on securities when the same were acquired at the rate higher than the face value, such amortization would have to be for the remaining period of maturity. X X X X Extracts X X X X X X X X Extracts X X X X ..... provision against exposure to Madhavpura Mercantile Co. Op. Bank Ltd. as on 31.03.2011. Another letter issued by the Ministry of the Agriculture Department of Agriculture Land Corporation, Krishi Bhawan New Delhi dated 05.08.2010 submitted by the assessee indicates that the RBI is in favour of revival of MMC Bank. It is the case of the Revenue that since this letter does not speaks of written off its fixed deposit made with MMC Bank, the assessee's claim cannot be exceeded too. Since, the assessee has not filed any corroborative evidence or justification regarding such write off amounting to ₹ 23,88,83,704/-, the same has been added on account of fixed deposit write off debited in the Profit and Loss account and added to the total income of the assessee, which was, in turn, confirmed by the Learned CIT(A). Hence, the instant appeal before us. 7. Heard the respective parties, perused the relevant materials available on record. It appears that on 13.01.2016 the assessee submitted as follows: "With reference to assessment proceeding for A.Y.2013-14, and in compliance to your above referred notices we are submitting the details as under (I) Kindly refer to Para two of your ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... II (Page No.7 to 12) As per the corrigendum of the meeting held on 26.5.2010 and notice of the department of Agriculture & Co-operation, Krishi bhavan, New Delhi the prospects of the revival of the MMCB were remote moreover the bank has make the provision for doubtful debt as per the letter of RBI,UBD(AH)TAFCUB.NO. 3367/12.33.01/2010-11. Thus as per the resolution of Board of Directors passed in the meeting dated 29th march,2013 same has been written off. Copy of RBI letter, circular of the Department and copy of resolution was appended in our previous submission therefore the same has not been repeated. Moreover Reserve Bank of India has cancelled the license of The Madhavpura Mercantile Cooperative bank Ltd. by giving a press release on 07TH June,2012. In its press release it observed that: • The MMCB itself has admitted about its precocious financial position • The MMCB accepted that the Reconstruction scheme failed due to non fulfillment of commitment of UCB • The MMCB accepted all its irregularities/ deficiency observed in the SCN issued for cancellation of licence • The deposits of bank has been eroded fully. The RBI then concluded that, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ative Bank Ltd. Ahmedabad. The letter clearly indicates that the Reserve Bank of India is in favour of Revival of Madhupura Mercantile Co-operative Bank. Further letter of Reserve Bank of India dated 02/12/2010 produced by the assessee is a letter to all Urban Cooperative banks to make full provision against their exposure to Madhupura Mercantile Bank as on 31/03/2010.However the assessee has not produced any other evidence or justification regarding write off or any other directions issued by the Reserve Bank of India. ii) It is also noticed on verification of the Return of income filed by the Madhupura Mercantile Co-operative Bank for the Assessment Year 2013-14 that the bank is having Cash and Bank Balances amounting to ₹ 654.89Cr. The assessee has not produced any evidence regarding any correspondence made with the Madhupura Mercantile Co-operative Bank or any legal action taken against the bank before the write off. 8. In view of the above discussion the reply given by the assessee is not acceptable and additions on account of fixed deposit write of amounting to ₹ 238883704/- debited in the profit and loss account is disallowed and added back to the total inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me is shown in the statement appended with previous submission. The Provision of Sec. 43D of the IT. Act. reads as under. "Sec. 43D - Notwithstanding anything to the contrary contained in any other provisions of the Act, - (a) In the case of a public financial institution or a scheduled bank or a State Financial Corporation or a State Industrial Investment Corporation, the income by way of interest in relation to such categories of bad or doubtful debts as may be prescribed having regard to the guidelines issued by the Reserve Bank of India in relation to such debts; (b) In the case of a public company relation to such debts. Shall be chargeable to tax in the previous year in which it is credited by the public financial institution or the scheduled bank or the State Financial Corporation or the State Industrial Investment Corporation or the Public Company to its profit and loss account for that year or, as the case may be, in which it is actually received by that institution or bank or corporation or company, whichever is earlier. Explanation - For the purposes of this section…………….' It is clarified that Section 43D provides that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ately under" interest Receivable Account" on the" Property and Assets " side of the balance sheet and corresponding amount shown under "Overdue interest Reserve Account" on the" Capital and Liabilities" side of the balance sheet. Thus, as it is mandatory required assessee has prepared its accounts exactly as per said guidelines. Since no amount is credited to profit and loss account and what has been actually received on NPA Accounts has been duly disclosed, the Provision of Section 43D of the Income Tax Act. Being not applicable and hence cannot be invoked. (3) In regards to large interest expenditure with respect to exempt investment and applicability of section 14A we respectfully clarified as under. a. The Provisions of Section 14A of the IT. Act, 1961 can be invoked only and only when the learned Assessing Officer having regard to the accounts of the assessee bank is not satisfied with the correctness of the claim of expenditure made by assessee. If the authority is satisfied with the claim, question of invoking the provisions will not arise. b. It may also be noted that no specific reasons has been assigned for disallowance. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e No. 65 to 133 ) "we clarify that as per the guidelines laid down by the Reserve Bank of India Investments are categorized as follow." Sr. No. Particulars Particulars (i) Held for Maturity (HTM) (ii) Available for sale (AFS ) (iii) Held for Trading (HFT ) Normally, at the time of acquisition of investments, category of investment is decided as to whether it is for trading or held for maturity. For this, your assessee, as duty bound, strictly follow the guidelines laid down by the Hon'ble Reserve Bank of India. For the allowability of claim of premium paid on purchase of Government Securities which are held under the HTM category we submit that on consistent basis assessee is following same method of accounting wherein amount of premium paid is distributed till the period of maturity and claim as Revenue Expenditure in respective year. Your assessee rely upon circular No. 665 dt. 05.10.1993 issued by the CBDT and decision in the matter of ACIT circle 1 Nasik, V. Ozer Merchant Co.Op. Bank Ltd. 41 Taxman. Com 110 (Pune Tribunal) ,Sir M Vishveswaraya co-op bank ltd vs. Jt CIT in ITA no. 1122/Bang/2010 dt.11/05/2012 & Cit v. Hdfc Bank(Bom.)." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c 4 by RBI which is being reproduced as under:- RESERVE BANK OF INDIA (Urban Banks Department) Bombay the 31" August. 1933 NOTIFICATION No.UBD.BR 94/A.9-88/89 - In pursuance of clause (1) of sub-section (b of section 'e of the Reserve Bank of India Act. 1934(of 1934) the Reserve Bank of India herby directs the inclusion in the Second Schedule to the said Act of the following banks namely. 1 Bombay Mercantile Co-operative Bank Ltd Bombay 2 Saraswat Co-operative Bank Ltd Bombay 3. Abhyudaya Co-operative Bank Ltd . Bombay 4. Development Co-operative Bank Ltd. Bombay. 5. Janata Sahakan Bank Ltd.. Pue 6. Jhararao Vithal Co-Opeative Bank Ltd. Bombay 7. Rajkot Nagrik Sahakari Bank Ltd. Rajkot. 8. Kalupur Commercial Co-operative Bank Ltd. Ahmedabad 9 Surat Peoples Co.Op Bank Ltd. Surat 10. Sangli Urban Co.Op. Bank Ltd. Sangli 11. Rupee Co Op. Bank Ltd. Pune The effective date of inclusion of the aforesaid banks in the Second Schedule shall be 1 September. 1988 A perusal of the above notification clearly proves that the appellant has been listed at Sr.No.8 and has been granted the status of a "Scheduled Bank" as per the RBI notification. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o force in the argument of the A.O. and the same are rejected. The ground of appeal is accordingly allowed." 11. Heard the respective parties, perused the relevant materials available on record. This is a settled principle of law that once it is established the appellant is a "scheduled bank" in terms of the notification of the RBI and interest accrued on NPA and has been classified by the RBI, the benefit of section 43B ought to have been applicable to the appellant and the same cannot be added under section 145 of the act as has been rightly considered by the Learned CIT(A) without any ambiguity so far as to warrant interference. Hence, we confirm the order of the Learned CIT(A). Thus the order is in favour of the assessee against the Revenue. 12. Ground No.3 : The deletion of disallowance u/s 14A r.w.r. 8D of ₹ 53,68,445/- has been challenged by the Revenue before us. 13. The Learned Advocate appearing for the assessee submitted before us that the Learned CIT(A) has relied upon the order passed by him in assessee's own case for A.Y. 2012-13. He, further relies upon the judgment passed by the co-ordinate bench in assessee's own case for A.Y. 2012-13 in ITA No.2124/Ahd/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilable with the assessee we do not find any error in the decision of ld. CIT(A) of restricting the disallowance to the extent of administrative expenses of ₹ 9,50000/. The Ld. Counsel has not pressed ground no. 3 of appeal of the assessee. Accordingly, the appeal of the Revenue is dismissed." We find that the issue is squarely covered in favour of the assessee and thus we find no ambiguity in the order passed by the Learned CIT(A) in deleting the addition made by the Learned AO u/s 14A r.w.r. 8D. Hence, this ground of appeal preferred by the Revenue is dismissed. 15. The next ground of deleting addition amortization of premium on Govt. Securities of ₹ 2,74,57,365/- 16. The capital expenditure has been challenged by the Revenue before us. We find that the Learned CIT(A) relying upon the order passed in A.Y. 2012-13 allowed such claim of the assessee. The Learned Advocate appearing for the assessee further relied upon the order passed by the Co-ordinate Bench in Assessee's own case for A.Y. 2012- 13 in ITA No.2124/Ahd/2016; copy whereof has been submitted before us. On the contrary the Learned DR relied upon the order passed by the authorities below. 17. Heard the res ..... X X X X Extracts X X X X X X X X Extracts X X X X
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