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TMI Blog2025 (3) TMI 354X X X X Extracts X X X X X X X X Extracts X X X X ..... .
Disallowing amount towards amortization of Government Securities (HMT) deleted - assessee was justified in contending for amortization of premium paid in excess of face value of securities held to maturity (HTM) category or period remaining till maturity was found reasonable by the CIT(A).
Depreciation on government securities shifted from AFS to HTM Securities at the beginning of the year allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... 3(2) and 142(1) of the Income Tax Act, 1961 (the "Act") alongwith questionnaire were issued and duly served upon the assessee. In response thereto, the assessee filed its reply which was taken on record and considered by the Ld. Assessing Officer ("AO"). The Ld. AO observed that during the relevant AY, the assessee bank has made a "provision for depreciation" of Rs. 34.5 Crores, however, the said amount has not been disallowed by the assessee while computing its total income as per the provisions of the Act. He, therefore issued a show cause notice to the assessee asking it to show cause as to why the amount of provision of Rs. 34.5 Crores should not be disallowed and added back to the income of the assessee and also noted that the assessee has not furnished any supporting documentary documents in support of its claim. The assessee filed its reply to the said show cause notice (incorporated in para 5.4. and 5.5 of the assessment order) but the same was not found to be acceptable by the Ld. AO. The assessment was completed by the Ld. AO at the total income of Rs.39,49,34,510/- vide order dated 24.03.2021 passed u/s. 143(3) r.w.s. 143(3A) & 143(3B) of the Act by making disallowance o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elling beyond the scope of scrutiny in making an addition of Rs. 34.50 cr as the ground on which the addition was made was not part of the issues notified to the appellant in the initial notice and the AO had not taken appropriate approvals to convert the case of appellant into complete scrutiny from limited scrutiny 6.2.1 The appellant in its submission during the appellate proceedings has not submitted any legal or factual details in support of the ground of appeal 1 However from the perusal of the assessment order it is clear that out of 6 reasons for selection of the appellant's case for scrutiny 3 were related to verifying large refund claimed by the appellant. The AO vide his questionnaire issued along with notice u/s 142(1) dated 19.1.2021 asked the appellant to explain the reason for claiming large refund and in response to the same the appellant vide its reply submitted that the refund was caused to the provision for depreciation made by it. So therefore the addition made by the AO is subsequent to enquiry as per reasons for which the appellant's case was selected for scrutiny In view of the same there is no fault in the action of the AO. The ground of appeal 1 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no. 17/2008 dated 26.11.2008 issued by the CBDT in this regard. The appellant has also relied on the following case laws in support of its contention: 1 CIT vs. Bank of Baroda 129 taxman 716 (Bombay) 2. ITO Srinagar vs. J&K bank Ltd. 95 ITD 141 (Amritsar ITAT) 3. Capital Local Area Bank Ltd. vs. ACIT Jalandhar 82 taxmann.com 387 (Amritsar ITAT) 4. Yes Bank vs. ACIT 88 taxnmann.com 431 (Mumbai ITAT) 5. Caylon Bank vs. DCIT 31 taxmann.com 231 (Mumbai ITAT) 6. ACIT vs. Chatrapati Rajeshri Sahu Urban Co-op Bank Ltd. IT Appeal No. 798 of 2011 (ITATPune) I have considered the assessment order of the AO and the submission made by the appellant. After the perusal of the submission of the appellant and after taking into consideration the RBI master Circular No. RBI/2015-16/43 DCBR. BPD (PCB) M.C. No. 4/16.20.000/2015-16 dated July 1, 2015, the Instruction no 17/2008 dated 26.11.2008 of the CBDT and the ratio laid down by the Hon'ble Courts in the various case laws cited by the appellant as discussed above I find that the appellant was justified in claiming the depreciation in value of investment amounting to Rs.34,50,00,000/- as an expenditure. The ground of appeal 3 is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- as an expenditure. The ground of appeal 3 is allowed." II. Reliance placed on Hon'ble Apex Court's decision in case of Southern Technologies Ltd- 320 ITR 577 while assailing the stand taken by Hon'ble CIT-A NFAC in placing reliance on RBI Master Circular No RBI/2015-16/43 DCBR BPD (PCB) MC. No 4/16.20.000/2015-16 dated July 1, 2015, is also totally misplaced, misleading uncalled for & based on incorrect understanding of legal position & for this purpose the assessee respondent wishes to place on record that in his own cases in the past, the same issue has been decided by Hon'ble ITAT Pune in favor of the assessee respondent in appeal no 103,1454,2432/PN/2012, which were decided on 31.01 2014 & also in appeal no 200/PN/2015 decided on 31 10.2017 II.I Therefore the assessee respondent also wishes to place on record that this is a COVERED CASE II.II moreover it will be worth placing on record that all these appeals have been decided after the decision in case of Southern Technologies Ltd was delivered by Hon'ble Apex Court III. Appellant - Department's contention that CBDT instruction no 17/2008 dt 26.11.2008 merely states that depreciation / appreci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Profit & Loss Account, is also totally wrong & misplaced because the RBI circular cited by the appellant - department is applicable to Commercial Banks only & does not have any applicability in case of Co-operative Bank & it may please be noted that the assessee-respondent is a Co-operative Bank Final Prayer- Your Honors after placing on record the appropriate legal position with respect to the case on hand, the respondent most humbly & respectfully wishes to place on record that the challenge to the Appellate order passed by Hon'ble CIT-A NFAC u/s 250 of the Act on 04.06.2024, is not correct both on facts as well as on legality, therefore the assessee respondent most respectfully makes a prayer for rejection of all the contentions made by the appellant - department & confirm the order passed by Hon'ble CIT-A NFAC." 8. We have heard the Ld. Representative of the parties, perused the material available on record and considered various judicial precedents relied upon by both the parties as well. The facts of the case are not in dispute. The Ld. AO has disallowed the "provision for depreciation" on AFS securities charged to P&L Account in AY 2018-19 under the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Supra). We find the Tribunal has discussed the issue and dismissed the grounds raised by the Revenue by holding as under: "4. After going through rival submissions and material on record we find that with the advent of section 80P(4) w.e.f. A.Y, 2007-08 has closed the doors for cooperative banks for claiming the benefit of deduction u/s.80P(2)(a)(1) from this total income. However, the cooperative society should now be entitled to be assessed as normal banking company. The clause (4) inserted in section 80P has taken away the benefit of the erstwhile deduction available to cooperative society in carrying on business of banking or providing credit facility to its members. The new clause (4) inserted by the Finance Act, 2006 w.e.f. 01-04-2007 reads as under: "The provision of the section was not in relation to any cooperative bank other than agricultural credit society or primary cooperative agricultural and rural development bank." 5. The intention of the provision may be derived more precisely from relevant Para 166 of the budget speech which stated that "Co-operative banks, like any other bank, are lending institutions and should pay tax on their profits, Primary Agricultur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cognized as income on the basis of conservatism. 3. HFT The individual scrips in the Held for Trading category will be marked to market at monthly or at more frequent intervals and provided for as in the case of those in the Available for Sale category. 7. In para (vii) of the CBDT Instruction No.17 of 2008 dated 26.11.2008, on 'Assessment of Bank deduction, states as under: check list for "As per RBI guidelines dated i6th 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 marked to market and are carried at acquisition cost unless these are more than the face value, in which case the premium should be amortised over the period remaining to maturity. In the case of HFT and AFS securities forming stock in trade of the bank, the depreciation/ appreciation is to be aggregated scrip wise and only net depreciation, if any, is required to be provided for in the accounts. The latest guidelines of the RBI may be referred to for allowing any such claims." 8. The ITAT, Mumbai Bench, in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This issue has been discussed and decided in ITA No.103/PN/2012 vide para 4 of this order. Facts being similar, so following the same reasoning, the issue has been decided in favour of assessee." ITA No. 2432/PN/2012: AY 2009- 10 "10. At the outset of hearing, the learned Authorized Representative did not pressed the grounds of appeal Nos. 1, 2, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16 and 17, so they are dismissed as not pressed. The grounds of appeal Nos.3, 4, 5 and 6 are with regard to claim of depreciation on government securities shifted from AFS to HTM Securities at the beginning of the year. This issue has been discussed and decided in ITA No. 103/PN/2012 vide para 4 of this order. Facts being similar, so following the same reasoning, the issue has been decided in favour of assessee." 9. Considering the facts of the case and legal position enumerated above and respectfully following the decision(s) of the coordinate bench of the Tribunal (supra) and in the absence of any contrary material brought on record by the Revenue to enable us to take a different view, the order of the Ld. CIT(A) is hereby upheld. The grounds raised by the assessee are accordingly dismissed. 10. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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