Poornavadi Nagri Sahakari Bank Ltd, ... vs Department Of Income Tax

Asstt. Commissioner of Income Tax, Circle- 2, Aurangabad. .... Appellant

Vs.

Poornavadi Nagri Sahakari Bank Ltd., Subhash Road, Beed - 431 122. PAN : AAAAP4233B .... Respondent

Department by : Smt. Shailja Rai Assessee by : Shri Sunil Ganoo Date of hearing : 04-03-2015 Date of pronouncement : 31-03-2015

ORDER

PER G. S. PANNU, AM

Both the captioned appeals by the Revenue relate to the same

assessee and involve a common issue, therefore, they have been clubbed and

heard together and a consolidated order is being passed for the sake of

convenience and brevity.

2. Since the facts and circumstances in both the appeals are similar, ITA

No.1422/PN/2013 pertaining to the assessment year 2009-10 is taken as the

lead case. This appeal is directed against the order of the Commissioner of

Income Tax (Appeals), Aurangabad dated 08.04.2013 which, in turn, has

arisen from an order dated 30.09.2011 passed by the Assessing Officer u/s

143(3) of the Income-tax Act,1961 (in short "the Act").

3. In this appeal, Revenue has raised the following Grounds of Appeal :-

"1. Whether on the facts and circumstances of the case, the Ld. Commissioner of Income Tax (Appeals), Aurangabad is correct in allowing the claim of assessee on account of depreciation on investment in Government Securities in the category of held to maturity (HTM) at Rs.7,16,02,408/-.

2 ITA Nos.1422 & 1423/PN/2013 2. Whether on the facts and circumstances of the case, the CIT(A) is correct in holding that brought forward losses are not to be reduced while calculating deduction u/s 36(1)(viia) of the Act.

3. On the facts and in the circumstances of the case, the order of the Assessing Officer be restored and that of the Commissioner of Income Tax (Appeals), Aurangabad be vacated.

4. The appellant craves leave to add, amend or alter any Grounds of Appeal."

4. In this appeal, the first issue raised by the Revenue is with regard to a

disallowance of Rs.7,16,02,408/- made by the Assessing Officer on account of

depreciation on diminution in the value of Government securities categorized

as Held to Maturity (HTM), which has since been deleted by the CIT(A).

5. In brief, the relevant facts are that the assessee is a Co-operative Bank

registered under the Maharashtra Co-operative Societies Act, 1960 and is

carrying on the business of banking in terms of a license issued by the

Reserve Bank of India (RBI). Assessee claimed deduction for amortization of

premium paid on acquisition of securities categorized as HTM, which was

disallowed by the Assessing Officer on the ground that such securities are

capital in nature. The CIT(A) has deleted the addition of Rs.7,16,02,408/-

following the decision of the Pune Bench of the Tribunal in the case of Latur

Urban Co-operative Bank vs. DCIT vide ITA No.778/PN/2011 dated

31.08.2012 wherein the similar issue has been decided in favour of the

assessee. Against such a decision of the CIT(A), Revenue is in appeal before

us.

6. Before us, it was a common point between the parties that similar issue

had come up before the Hon'ble Bombay High Court in the case of CIT vs.

HDFC Bank Ltd., (2014) 366 ITR 505 (Bom.). The Hon'ble Bombay High

Court in case of HDFC Bank Ltd. (supra) in Income Tax Appeal No.330 of

2012 vide order dated 23.07.2014, on a similar issue on account of deduction

with respect to diminution in the value of investment in Government securities 3 ITA Nos.1422 & 1423/PN/2013

categorized as Held To Maturity (HTM) after referring to the mandate of the

RBI Guidelines, and the decision of the Hon'ble Supreme Court in the case of

Southern Technologies vs. JCIT, (2010) 320 ITR 577 (SC) had dismissed the

appeal filed by the Revenue.

7. Following the aforesaid precedent, we hold that the assessee is entitled

to the deduction of Rs.7,16,02,408/- being depreciation on investment in

Government securities categorized as HTM. Accordingly, we hereby affirm

the action of CIT(A) in deleting the disallowance of Rs.7,16,02,408/-

representing depreciation on investment in Government Securities under the

HTM category. Thus on this aspect, Revenue fails.

8. The second issue in this appeal relates to the manner of computing

deduction allowable to the assessee u/s 36(1)(viia) of the Act. The assessee

had filed a return of income at a loss whereas the Assessing Officer after

making certain disallowances had assessed a positive income and therefore

he computed deduction allowable to the assessee in terms of section

36(1)(viia) of the Act. While computing such deduction, the Assessing Officer

reduced the brought forward losses of earlier years. This aspect of the

controversy was carried by the assessee in appeal before the CIT(A) who

disagreed with the action of the Assessing Officer. By way of Ground of

Appeal No.2, Revenue has assailed the stand of the CIT(A).

9. At the time of hearing, it was a common point between the parties that

the said issue become redundant because after assessee has succeeded on

account of deduction for depreciation on investment in Government securities

categorized as HTM of Rs.7,16,02,408/-, the assessed income is a figure of

loss thereby obviating the necessity of computing deduction u/s 36(1)(viia) of

the Act. Since assessee has succeeded on the aspect of allowability of

depreciation on investment in Government securities categorized as HTM in 4 ITA Nos.1422 & 1423/PN/2013

the earlier paras, the aforesaid Ground of Appeal No.2 is rendered infructuous

and is accordingly dismissed.

10. In the result, the appeal of the Revenue for assessment year 2009-10 is

dismissed.

11. In so far as, the appeal of the Revenue for assessment year 2010-11 is

concerned, it was a common point between the parties that the facts and

circumstances of the dispute are similar to assessment year 2009-10, so our

decision in assessment year 2009-10 shall apply mutatis-mutandis in

assessment year 2010-11 also.

12. In the result, both the captioned appeals of the Revenue are dismissed,

as above.

Order pronounced on 31 st March, 2015.

Sd/- Sd/- (SUSHMA CHOWLA) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER

Pune, Dated: 31 st March, 2015. Sujeet

Copy of the order is forwarded to: - 1) The Assessee; 2) The Department; 3) The CIT(A), Aurangabad; 4) The CIT, Aurangabad; 5) The DR "A" Bench, I.T.A.T., Pune; 6) Guard File.

By Order //True Copy//

Assistant Registrar I.T.A.T., Pune